Holding

The impugned Rule 106(Tha) imposes a charge on the final potable liquor (IMFL) produced using imported rectified spirit, which is a permissible impost within the State’s competence and not a tax or excise duty.

Summary

The State of Jharkhand, through its Revenue Board, issued a notification under Section 90 of the Jharkhand Excise Act, 1915 imposing an import fee of Rs.6 per litre of pure alcohol (LPL) on rectified spirit used for manufacturing Indian Made Foreign Liquor (IMFL). Ajanta Bottlers & Blenders challenged the levy, arguing that the State lacked legislative competence to tax non‑potable rectified spirit and that the charge was a tax or excise duty requiring a quid pro quo. The High Court held the levy unconstitutional, but the Supreme Court reversed this, interpreting the rule as imposing a charge on the final potable product (IMFL) after the spirit has been processed, which falls within the State’s power under List II entries 6, 8 and 66. The Court further held that the levy is an impost/fee, not a tax or excise duty, and no quid pro quo is required. Consequently, the appeal was allowed, the High Court judgment set aside, and the writ petition dismissed.

Issues considered

The levy imposed by the Jharkhand Revenue Board is within the State's legislative competence under List II.
Whether the charge on imported rectified spirit constitutes a tax, excise duty, or a regulatory fee/impost.
Whether the State must demonstrate a quid pro quo for imposing the fee.
Whether the levy is on the raw imported rectified spirit (non‑potable) or on the final IMFL product (potable).

Legislation cited

Jharkhand Excise Act, 1915s. 90

Subjects

ExciseImport feeRectified spiritPotable liquorState legislative competenceTax vs feeJharkhand Excise ActConstitutional lawList IIImpostRegulation of liquorPublic healthQuid pro quo

Judgment

[2019] 8 S.C.R. 1071 1071

THE STATE OF JHARKHAND & ORS. A
v.
M/S AJANTA BOTTLERS & BLENDERS PVT. LTD.
(Civil Appeal No. 5138 of 2019)
JULY 02, 2019 B
[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]
Jharkhand Excise Act, 1915 – s.90 – Revenue Board
notification dated 06.11.2012 – r.106 (Tha) – Levy of import fee on
rectified spirit – The Board of Revenue in exercise of power conferred
C
u/s.90 of the Act inserted the Rule 106 (Tha) and levied fee on the
import of rectified spirit by notification dated 06.11.2012 – Writ
Petition – High Court held that the State had no legislative
competence to levy tax/fee on the import of rectified spirit, as it is a
non-potable liquor i.e. alcohol not fit for human consumption –
Appellant-State contended that import fee was not on rectified spirit D
in its raw form as such, but on pure alcoholic liter ‘LPL’ in the form
of potable liquor – On appeal, held: On perusal of the impugned
provision as a whole, it follows that the substance of the provision
is to levy charges on the product Indian Made Foreign Liquor (IMFL)
produced or manufactured by use of imported rectified spirit – In
E
that sense, the levy is not on the input (imported rectified spirit) of
the final product as such but is on the manufactured or produced
product being potable alcohol palatable to human consumption –
For the purposes of computing the levy, the yardstick of Rs.6 LPL
on the total quantity of imported rectified spirit utilized for production
of IMFL is reckoned – Thus, the impost is not on the imported F
rectified spirit as such but only on the produced foreign liquor before
it is bottled for sale in the wholesale or retail market, as the case
may be – It is a case of legislation in respect of potable alcohol, the
State is competent to legislate in that regard and levy charges-be it
for regulating the same or impost for parting with its rights regarding
G
manufacture, storage, export, sale and possession thereof.
Jharkhand Excise Act, 1915 – s.90 – Revenue Board
notification dated 06.11.2012 – r.106 (Tha) – Nature of tax or excise
duty – The Board of Revenue u/s.90 of the Act chose to levy fee on
H
1071
1072 SUPREME COURT REPORTS [2019] 8 S.C.R.

A the import of rectified spirit by notification dated 06.11.2012 –
Appellant-State contended that the levy of charges or impost is
neither in the nature of a tax nor excise duty – Held: There is merit
in the contention of appellant-State that the impost is neither in the
nature of a tax nor excise duty but it is towards the charges by
whatever name, for regulating the production of potable liquor to
B
preserve public health and morality including for parting with its
rights or privileges regarding manufacture, supply or sale of potable
liquor or intoxicating liquor and to regulate the use of imported
rectified spirit for production and sale of potable liquor – In such a
case, the State need bear no quid pro quo to the services rendered to
C the licencee for production of foreign liquor (IMFA).
Allowing the appeal, the Court
HELD : 1. The Rule 106 (Tha) noted in the notification
dated 06.11.2012, makes it amply clear that the levy or impost
fructifies only upon completion of distillation process (in two
D stages-first from rectified spirit to Extra Neutral Alcohol (ENA)
and then from ENA to Indian Made Foreign Liquor (IMFL)) and
in particular converting into a final product “IMFL”. The
collection of impost is, however, deferred until the bottling of
that product. In other words, the levy is not at the stage of import
E of rectified spirit within the State; nor at the stage of initial
distillation thereof to ENA and not until the product IMFL is
ready for bottling as such. Thus, the levy under the impugned
rule ripens or fructifies only after the original raw material
(imported rectified spirit) has undergone distillation process at
two different stages and transmute and mutate into an intoxicant
F or potable alcohol palatable to human consumption, but its
(impost) collection is effected just before bottling it in that form
(potable liquor). Indeed, the levy predicated in this rule is on the
total quantity of imported rectified spirit utilised for mutating it
in the form of IMFL, a new produce. The last part of the rule
G stipulates the quantum of charges to be levied on such utilized
imported rectified spirit for production of the foreign liquor. For
that limited purpose, the quantity of imported rectified spirit
utilized in the production of potable liquor, is reckoned.
[Para 10] [1086-D-H; 1087-A]

H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1073
BLENDERS PVT. LTD.

2. Reading the impugned provision as a whole and line by A
line or word by word in this perspective, it must follow that the
substance of the provision is to levy charges on the product IMFL
produced or manufactured by use of imported rectified spirit. In
that sense, the levy is not on the input (imported rectified spirit)
of the final product as such but is on the manufactured or produced
B
product being potable alcohol palatable to human consumption.
For the purposes of computing the levy, the yardstick of Rs.6
per LPL on the total quantity of imported rectified spirit utilized
for production of IMFL is reckoned. Thus, the impost is not on
the imported rectified spirit as such but only on the produced
foreign liquor before it is bottled for sale in the wholesale or C
retail market, as the case may be. If so understood, the whole
edifice of the argument of respondents regarding the
interpretation of the impugned rule must collapse. For, the
challenge to the impugned rule is on the assumption that it permits
the competent authority to levy charges on the imported rectified
D
spirit and not fit for human consumption but which has the potency
of being used for producing intoxicants or potable liquor though
exclusively meant for industrial purposes. Once that assumption
is discounted or disregarded, nothing more survives for
consideration. This Court says so because, it is well established
that the State may pass any legislation in the nature of prohibition E
of potable liquor referable to Entry 6 and 8 of List II and may also
laydown regulations to ensure that non-potable alcohol is not
diverted and misused as a substitute for potable alcohol. Had it
been the case of levy on non-potable alcohol (imported rectified
spirit) per se, only then the question about the competency of the
F
State Legislature or the justness of the levy on the doctrine of
quid pro quo may become relevant. However, if it is a case of
legislation in respect of potable alcohol, as has been noted by
this Court hitherto, the State would be competent to legislate in
that regard and levy charges – be it for regulating the same or
impost for parting with its rights regarding manufacture, storage, G
export, sale and possession thereof. [Para 11] [1087-B-G]
3. The next question is whether the levy is in the nature of
tax or excise duty. If it is a case of excise duty on potable liquor

H
1074 SUPREME COURT REPORTS [2019] 8 S.C.R.

A produced by use of imported rectified spirit, the State has
jurisdiction to legislate in respect of duty on the production or
manufacture of such goods produced or manufactured within the
State. In the present case, there is merit in the submissions of
the appellant State that the impost is neither in the nature of a
tax nor excise duty but it is towards the charges by whatever
B
name, for regulating the production of potable liquor to preserve
public health and morality including for parting with its rights or
privileges regarding manufacture, supply or sale of potable liquor
or intoxicating liquor and to regulate the use of imported rectified
spirit for production and sale of potable liquor. In such a case,
C the State need bear no quid pro quo to the services rendered to
the licencee for production of foreign liquor (IMFA). [Para 14]
[1092-F-G; 1093-A]
4. The fact that the manufacturer-respondent has already
obtained requisite licences for import of rectified spirit and
D production of foreign liquor (IMFA) on payment of fixed rates
does not mean that the State has surrendered all facets of its
rights in respect of every form of activity in relation to potable
liquor – its manufacture, storage, export, import, sale and
possession. The amended provision is an enabling provision
authorising the State to levy charges or impost for ceding its one
E or more of the activity in respect of foreign liquor (IMFL)
produced by use of imported rectified spirit. Such impost can be
in addition to the general power of the State to issue licence on
payment of fees for production and sale of potable liquor. As
observed in Har Shankar case, the State need bear no quid pro
F quo to the services rendered to the licensees of producer of
foreign liquor. [Para 15] [1093-B-D]
Har Shankar and Ors. v. The Dy. Excise and Taxation
Commissioner and Ors. (1975) 1 SCC 737 : [1975] 3
SCR 254 – followed.
G Deccan Sugar & Abkari Co. Ltd. v. Commissioner of
Excise, A.P. (2004) 1 SCC 243 – relied on.
State of U.P. & Ors. v. Vam Organic Chemicals Ltd. and
Ors. (2004) 1 SCC 225 : [2003] 4 Suppl. SCR 957 ;
Synthetics and Chemicals Ltd. and Ors. v. State of U.P.
H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1075
BLENDERS PVT. LTD.

and Ors. (1990) 1 SCC 109 : [1989] 1 Suppl. SCR A
623 – referred to.
Case Law Reference
[1975] 3 SCR 254 followed Para 12
(2004) 1 SCC 243 relied on Para 13 B
[2003] 4 Suppl. SCR 957 referred to Para 16
[1989] 1 Suppl. SCR 623 referred to Para 16
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5138
of 2019.
C
From the Judgment and Order dated 25.07.2013 of the High Court
of Jharkhand in Writ Petition (T) No. 7499 of 2012.
Tapesh Kumar Singh, Kumar Anurag Singh, Aditya Pratap Singh,
Advs. for the Appellants.
Rakesh Dwivedi, Sr. Adv., Satyabir Bharti, Arun K. Sinha, Rakesh D
Singh, Sansriti Pathak, Eklavya Dwivedi, Siddharth Iyer, Advs. for the
Respondent.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J. 1. Leave granted. E
2. This appeal takes exception to the impugned judgment and order
of the High Court of Jharkhand at Ranchi in Writ Petition (T) No.7499
of 2012 dated 25th July, 2013, whereby the writ petition filed by the
respondent to assail the notification dated 6th November, 2012, as published
in the official gazette on 10th November, 2012, issued by the Board of F
Revenue, Jharkhand in exercise of powers conferred under Section 90
of the Jharkhand Excise Act, 1915 came to be allowed on the ground
that the State had no legislative competence to levy tax/fee on the import
of rectified spirit, as it is a non-potable liquor i.e. alcohol not fit for human
consumption. Additionally, the High Court opined that the appellant-State
had failed to justify the impugned levy on rectified spirit on the basis of G
services provided by the State in lieu thereof or being in the nature of
quid pro quo. The original notification is in Hindi, the same reads thus:

H
1076 SUPREME COURT REPORTS [2019] 8 S.C.R.

A “ANNEXURE-3

>kj[k.M xtV
vlk/kkj.k vad
B >kj[k.M ljdkj }kjk izdkf”kr
la[;k 680 19 dkfÙkZd] 1934 “kdkCn
jkaph] “kfuokj 10 uoEcj] 2012
jktLo i’kZn
C
vf/klwpuk
8 uoEcj] 2012
la[;k&1@uhfr&40&21@2012&926@jk0i0&>kj[k.M
mRikn vf/kfu;e 1915 ¼vf/fu;e&2] 1915½ dh /kkjk&90 }kjk iznRr
D “kfDr;ksa dk iz;ksx djrs gq,] jktLo i’kZn] >kj[k.M] i’kZn vf/klwpuk
la[;k&23&137&2] fnukad 29 vizy S ] 1919 ds vUrxZr cukbZ xbZ fu;ekoyh
fu;e&106 ¼V½ ds ckn ,d u;k fu;e&106 ¼B½ fuEu izdkj tksMr+ h gS%&
fu;e&106 ¼B½ %&^^vf/klwpuk la[;k&470 ,Q- fnukad 15
E
tuojh] 1915 ds dafMdk&3 ds “kh’kZ ^fons”kh “kjkc^ dk mi “kh’kZ ¼d½ ds
vUrxZr mn~?kksf’kr fons”kh “kjkc ftldk fofuekZ.k mRikn vf/kfu;e dh
/kkjk&2 ¼15½ (iii) ds vuq:i fd;k tk,xk ds mRiknu gsrq vk;kfrr
lq’ko@la”kksf/kr lq’ko] ftldk mi;ksx loZizFke iqujklou fof/k ls bZ-
F
,u-,- ds fofuekZ.k esa fd;k tk,xk] ds fons”kh efnjk esa is; iz;kstukFkZ
ifjorZu ds le; ijUrq efnjk ds cksrycanh ds iwoZ] bl mn~n”s ; ls vk;kr
dh x;h lq’ko@la”kksf/kr lq’ko dh dqy ek=k ij 6@& : izfr ,y-ih-
yhVj dh nj ls vk;kr “kqYd tek fd;k tk,xkA**
G
;g vf/klwpuk jktdh; xtV esa izdk”ku dh frfFk ls izHkkoh gksXkkA
la[ ;k&1@uhfr&40&21@2012&927@jk-i-&>kj[k.M mRikn
vf/kfu;e] 1915 ¼vf/kfu;e&2] 1915½ dh /kkjk&90 }kjk iznRr “kfDr;ksa

H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1077
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

dk iz;ksx djrs gq,] jktLo i’kZn] >kj[k.M] i’kZnh; vf/klwpuk A
la[;k&23&137&2] fnukad 29 vizy
S ] 1919 ds vUrxZr cukbZ xbZ fu;ekoyh
fu;e&106 ¼B½ ds ckn ,d u;k fu;e&106 ¼M½ fuEu izdkj tksMr+ h gS%&
fu;e&106¼M½ %& ^>kj[k.M jkT; esa ns”kh efnjk@elkysnkj
B
ns”kh efnjk ds is; iz;kstukFkZ mRiknu ds mn~ns”; ls] vk;kfrr lq”ko@
la”kksf/kr lq’ko ds ns”kh efnjk ,oa elkysnkj ns”kh efnjk esa ifjorZu ds
le; ijUrq efnjk ds cksrycanh vFkok lSpsfVax iwoZ] of.kZr mn~n”s ; ls]
vk;kr dh xbZ lq’ko@la”kksf/kr lq’ko dh dqy ek=k ij 0-25 :- ¼iPphl
C
iSlk½ izfr cYd yhVj dh nj ls vk;kr “kqYd tek fd;k tk,xkA**
;g vf/klwpuk jktdh; xtV esa izdk”ku dh frfFk ls izHkkoh gksxkA
la[ ;k&1@uhfr&40&21@2012&928@jk-i-&>kj[k.M mRikn
vf/kfu;e] 1915 ¼vf/kfu;e&2] 1915½ dh /kkjk&90 }kjk iznRr “kfDr;ksa D
dk iz;ksx djrs gq,] jktLo i’kZn] >kj[k.M] i’kZnh; vf/klwpuk
la[;k&23&137&2] fnukad 29 vizSy] 1919 ds }kjk cukbZ xbZ fu;ekoyh
ds vUrxZr vf/klwfpr vf/klwpuk la[;k&1@uhfr&10&33@ 2008&583]
fnukad 15 ebZ] 2008 }kjk cuk;s x;s fu;e&106¼t½ esa fuEu izdkj E
la”kks/ku djrh gS%&
fu;e&106¼t½ %& ^^>kj[k.M jkT; ds ckgj fdlh Hkh LFkku@{ks= ls
lq’ko@la”kksf/kr lq’ko@bZ-,u-,- dk] is; iz;kstukFkZ vk;kr fd;s tkus
ij] vk;kr dh tkusokyh ek=k ij 0-25 :- ¼iPphl iSlk½ izfr cYd F
yhVj dh nj ls ikjd “kqYd ¼ijfeV Qh½ >kj[k.M jkT; esa ns; gksxkA**
;g vf/klwpuk jktdh; xtV esa izdk”ku dh frfFk ls izHkkoh gksxkA
jktLo i’kZn] >kj[k.M ds vkns”kkuqlkj]
G
¼g-@&½ vLi’V]
mi lfpo]
jktLo i’kZn] >kj[k.M] jkaphA**

H
1078 SUPREME COURT REPORTS [2019] 8 S.C.R.

A Free translation thereof has been filed by the appellant as annexure
P-2. However, during the hearing as some doubt was raised about the
accuracy of annexure P-2, we thought it appropriate to get the document
(original in Hindi) translated from the official translator of this Court.
That translated version, reads thus:
B “Translated version of Gazette by the Official Translator of the
Supreme Court.
ANNEXURE -3
THE
JHARKHAND GAZETTE
C EXTRAORDINARY
PUBLISHED BY THE GOVERNMENT OF JHARKHAND
No. 680 19 Kartik, 1934 Shakabd
Ranchi, Saturday, 10th November 2012

D REVENUE BOARD
Notification
6th November 2012
No.1/ Policy-40-21/2012-928/ Ra. Pa.- In exercise of the power
conferred by section 90 of Jharkhand Excise Act 1915 (Act-2 1915), the
E Revenue Board, Jharkhand makes the following addition of new rule in
Rule 106 (Tha) after Rules Rule 106 (Ta) in Notification No. 23-137-2
dated 29th April 1919.
Rule 106 (Tha): Foreign Liquor under sub-head (d) of head ‘Foreign
Liquor’ in Para-3 of Notification No. 470 F. dated 15 January 1919,
F which manufacturing shall be done in accordance with section-2 (15)(iii)
of Excise Act, for its manufacturing, the imported spirit/ rectified spirit,
which shall be first used for manufacturing of E.N.A. through repeated
distillation, for foreign liquor beverage (at the time of conversion), but
before bottling of liquor, for this purpose Import fee shall be deposited at
the rate of Rs. 6/- per L.P. liter on the total quantity of imported spirit/
G rectified spirit.”
This notification shall come into force on the date of its publication
in the official gazette.
No.1/Policy-40-21/2012-927/Ra.Pa.- In exercise of the power
conferred by Section 90 of Jharkhand Excise Act, 1915 (Act 2, 1915),
H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1079
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

Board of Revenue, Jharkhand makes the addition of new Rule – 106(Da) A
after Rule 106(Tha) of the Rules prepared under Board Notification
No.23-137-2 dated 29th April, 1919
Rule 106(Da):- With the purpose of manufacturing of country liquor/
spiced country liquor beverage in the State of Jharkhand, at the time of
conversion in imported alcohol/rectified country spirit and spiced country B
liquor, but before bottling and storage of liquor, with the described purpose,
the import fee shall be deposited at the rate of Re.0.25 (Twenty Five
Paise) per Bulk Litre on the total amount of imported spirit/rectified
spirit.
This notification shall come into force on the date of its publication C
in the Official Gazette.
No.1/Policy-40-21/2012-928/Ra.Pa. – In Exercise of the power
conferred by Section 90 of Jharkhand Excise Act, 1915 (Act 2, 1915),
the Board of Revenue, Jharkhand, makes amendment in the Rule 106
(Ja) made vide notified notification No.1/Policy-10-32/2008-583, dated D
15th May 2008 in the Rules made vide Board Notification No.23-137-2
dated 29 April 1919:-
Rule 106(Ja) :- On the import of spirit/rectified spirit/ENA beverage
from any place/area outside the state of Jharkhand, the permit fee at the
rate of Re.0.25 (Twenty Five Paisa) per Bulk Litre will be payable on E
the imported quantity in the State of Jharkhand.
This notification shall come into force on the date of its publication
in the official gazette.
By the order of Board of Revenue, Jharkhand
Sd/-illegible F
Deputy Secretary,”
3. As aforesaid, the High Court accepted the challenge to the
above-mentioned notification for the reasons noted hitherto. The relevant
discussion in the impugned judgment in that behalf, reads thus:
“13. The State under List-II is empowered to levy fee under Entry G
66 in respect of any of the matters in the list but not including fees
taken in any Court. Entry 66 read with entry 8 of List II therefore
provides competence to the State to levy fee in respect of
intoxicating liquor i.e. alcoholic liquor fit for human consumption
i.e. to say on the production, manufacture, possession, transport, H
1080 SUPREME COURT REPORTS [2019] 8 S.C.R.

A purchase and sale of intoxicating liquor. The present levy seeks
to levy fee on the import of rectified spirit to be utilized for
the purpose of, firstly for manufacture of ENA through re-
distillation process and then for manufacture of IMFL.
Rectified spirit is not fit for human consumption and it therefore
does not come within the meaning of intoxicating liquor as contained
B
in Entry 8 of List II. Levy on the import of rectified spirit is not a
fee on intoxicating liquor i.e. fit for human consumption. By the
impugned notification, the Board of Revenue in exercise
of power conferred under section 90 of the Excise Act, 1915
has chosen to levy fee on the import of rectified spirit which
C is used for manufacture of ENA through re-distillation
process and then for the purpose of manufacture of IMFL
at the time before bottling @ Rs. 6.00 per LP Litre. Industrial
alcohol/non-potable spirit i.e. rectified spirit being not alcoholic
liquor fit for human consumption, cannot be the subject matter of
any regulation or control by the State under Entry 8, 51 and 66 of
D
List II of Seventh Schedule of the Constitution. The State has
the power to levy fees under the garb of grant of privilege
from those who deal in liquor or alcohol fit for human
consumption i.e. potable liquor as distinct from non-potable
liquor or alcoholic liquor unfit for human consumption.
E Under Entry 51 of List-II, State has been empowered to levy
excise duty on alcoholic liquor fit for human consumption
manufactured or produced in the State and countervailing duty at
the same rate or lower rates on similar goods manufactured or
produced elsewhere in India. Even under the instant Entry, the
F rectified spirit which is non potable liquor, does not come within
the meaning of alcoholic liquor fit for human consumption on which
the State can levy excise duty under Entry 51 of List-II. The
levy of import fees on rectified spirit therefore by the State
Legislature before bottling of IMFL by shifting the event
of taxation, cannot be held to be justified as in pith and
G substance, the levy is on import of rectified spirit i.e. non-
potable liquor i.e. alcohol not fit for human consumption.
Levy of fee on non-potable liquor i.e. unfit for human consumption
or industrial alcohol is permissible under Entry 52 of List-I of
Seventh Schedule of the Constitution. Under Entry 84 of List-I,
H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1081
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

excise duty on tobacco and other goods manufactured or produced A
in India can be levied except on alcoholic liquor for human
consumption; opium, Indian hemp and other narcotic drugs and
narcotics. In the wake of such clear demarcation of legislative
fields between Union and State Legislature, the impugned
notification levying import fees on rectified spirit i.e. non potable
B
liquor or alcoholic liquor unfit for human consumption by applying
the rule of pith and substance, 18 cannot come within the legislative
competence of the State Legislature. The impugned levy
therefore is beyond the legislative competence of the State
Legislature and consequentially also beyond the rule
making power of the Board of Revenue.” C
(emphasis supplied)
And again…………….

“16. The respondent State sought to justify the levy as a regulatory
measure for supervision and control of potable liquor to protect D
public health and morality. However, there are no materials
brought on record by the respondent State to justify that
any services in lieu thereof are provided in the nature of
quid pro quo to justify the imposition of such a levy. The
petitioner is already having various licences granted by the Excise E
Department, Government of Jharkhand in Form- 19, 19(B), 20,
25 and 28(A) prescribed by the Board of Revenue and is paying
the licence fee for grant of such licences. Under Form-19 a licence
for compounding and blending of foreign liquor is given. In Form-
19(B), petitioner has been granted licence for the manufacture of
foreign liquor / beer as also for the sale of foreign liquor / beer F
through licencee distributors as also to import or transport the
same under bond. The petitioner has a licence for bottling of potable
foreign liquor under Form-20 for which it pays fees in advance of
Rs. 50,000/- for the year. In Form-25 it has been granted licence
to manufacture denatured spirit at its distillery / warehouse. The
G
petitioner also has a licence under Form-28(A) to manufacture
spirit in distillery not used in the manufacture of potable liquor for
which it also pays a licence fees. It is the contention of the petitioner
that it is paying establishment charges on the posting of excise
official at its premises. Therefore, the respondent State have
H
1082 SUPREME COURT REPORTS [2019] 8 S.C.R.

A not been able to justify the impugned levy on rectified spirit
on the basis of services provided in lieu thereof. Besides
this, the petitioner has been paying licence fee for issuance
of licence under different forms in the nature of a regulatory
fee. The impugned levy therefore, is not justifiable on this
account as well.
B
17. In these circumstances, levy of import fee on rectified spirit
which is impermissible for the State Legislature, also has the effect
of impeding the inter-State trade and commerce as guaranteed
under Article 301 of the Constitution of India. At the same time, it
is within the exclusive legislative competence of Parliament to
C levy any duty or tax on rectified spirit i.e. industrial alcohol. Such
action therefore, is in teeth of the Article 301 of the Constitution
of India.
18. In view of the aforesaid reasons and discussions and in view
of the settled law laid down by the judgments of the Hon’ble
D Supreme Court referred to herein above, the notification dated
10th November 2012 issued by the Board of Revenue, Jharkhand
in exercise of powers conferred under section 90 of the Jharkhand
Excise Act, 1915, cannot be sustained in law and it is accordingly
quashed. Consequentially, the demand raised vide notice dated
E 24th November 2012 (Annexure-4) for deposit of import fees on
rectified spirit, is also quashed. Petitioner shall be entitled to refund
of any such import fees deposited under the impugned notification.
Writ petition is accordingly allowed.”
(emphasis supplied)
F
The correctness of the view so taken by the High Court is the
subject matter of challenge in this appeal, at the instance of the State. In
defending the notification before the High Court, the appellant-State had
asserted that the rule inserted by the subject notification being Rule 106
(Tha), is an impost and is merely described as an import fee. Because, it
G is reckoned on the basis of quantity of pure alcohol content of rectified
spirit (which is known as “London Proof Liter”), imported for the purposes
of manufacture of potable Foreign Liquor after the process of
compounding, blending and reduction of strength of spirit from over proof
strength to under proof strength is complete. Further, the unit for charging
import fee is London Proof Liter (for short, “LPL”) because, it does not
H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1083
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

change even after the spirit has undergone through the process of A
compounding, blending & reduction of strength. Indisputably, nothing
can be nor will be charged in advance, so long as the imported rectified
spirit is non-potable and till it is in the form of raw material. In other
words, nothing is charged on industrial alcohol. Thus, it is neither a violation
of provisions of the Constitution nor is it an arbitrary use of power under
B
Section 90(7) by the Board of Revenue who was competent to issue the
same towards levy of any kind of fee on potable liquor. In substance, the
stand of the appellant-State is that the stated import fee is not on rectified
spirit in its raw form as such, but on pure alcoholic liter “LPL” in the
form of potable liquor. Further, it is a regulatory fee only for supervision
and control of production of potable liquor to protect public health and C
morality. It was further asserted that no right inheres in any person for
doing business in intoxicants. That right exclusively belongs to the State.
Resultantly, it is open to the State to part with those rights for a
consideration on conditions as may be deemed appropriate. There is no
need for the State to establish commensurate services rendered by it to
D
apply the doctrine of quid pro quo, in respect of impost of any kind of
fee on potable liquors.
4. The High Court, however, was not impressed by the stand taken
by the State and proceeded to answer the matters in issue against the
State for reasons afore-quoted, in the extracted portion of the impugned
judgment. E

5. The appellant-State has approached this Court to assail the
view so taken by the High Court. More or less, the State has reiterated
its stand as was taken before the High Court. In that, the charge in
terms of the impugned Rule 106(Tha) to the licensees was neither in the
nature of a tax nor excise duty. The impost is a normal incidence of a F
trading or business transaction in respect of the rights exclusively inhering
in the State - with regard to production and manufacture of intoxicating
liquor covered by Entry 8 of list II of the Seventh Schedule of the
Constitution of India. The levy is, essentially, to regulate and ensure that
the imported rectified spirit is not diverted and misused as a substitute G
for potable alcohol. It is open to the State to deal in intoxicants its
manufacture, possession, sale, transport, import, export, consumption on
premises of hotel and restaurants etc. Further, the State has exclusive
rights and privileges of manufacturing and selling liquor. It is urged that
the approach of the High Court is completely wrong and against the
settled legal position. H
1084 SUPREME COURT REPORTS [2019] 8 S.C.R.

A 6. Per contra, the respondents have supported the conclusions
reached by the High Court and would contend that a close reading of
Rule 106(Tha) clearly indicates that it purports to levy “import fee” on
imported rectified spirit, used for production of Indian Made Foreign
Liquor (for short, “IMFL”) manufactured in the respondent factory
under a valid licence for import and also to manufacture of the product
B
(IMFL). It is urged that the provision regarding collection of the fee
after the rectified spirit has been used to first produce ENA and then
potable liquor, would not alter the character of the levy being impost on
the imported rectified spirit. The State is not competent to legislate on
imported industrial liquor or levy any charge or tax thereon as such. The
C postponement of realization of charges predicated in the impugned rule
would not alter the efficacy of the rule, providing for levy of import fee
on rectified spirit. Relying on the decisions of this Court it was urged
that rectified spirit is highly intoxicating and cannot be consumed by
humans. It is industrial alcohol on which the State is not competent to
legislate or levy taxes in the garb of duty or fee. The imported rectified
D
spirit, in that form, would not attract excise duty. That can primarily be
imposed on the happening of production or manufacture of goods
produced or manufactured within the State. It is then urged that the
respondent is engaged in production of “IMFL” for which it has obtained
all essential licences prescribed by the Board of Revenue on payment of
E licensing fees for grant of such licenses such as “Form 19” for
compounding and blending of foreign liquor, Form19-B for manufacture
of foreign liquor/beer as also for the sale of foreign liquor/beer through
licensee distributors as also to import or transport the same, Form 20 for
bottling of potable foreign liquor, Form 25 for manufacture denatured
spirit at its distillery/ warehouse, Form 28(A) for manufacture of spirit in
F
distillery not used in the manufacture of potable liquor. In that view of
the matter, it is not open to the State to levy impugned charges in the
garb of import duty, or excise duty, as the case may be, on the imported
rectified spirit, for production of “IMFL”. The respondent prays that the
appeal be dismissed being devoid of merits and the decision of the High
G Court be affirmed.
7. We have heard learned counsel for the parties. Additionally,
they have filed written submissions.
8. The seminal issue to be answered in this appeal is about the
purport of the notification dated 6th November, 2010 as published on 10th
H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1085
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

November, 2012 and whether it is in the nature of legislation by the State A
on the subject of industrial alcohol. Alcohol can generally be classified
into the following categories:
“I. Isopropyl alcohol (or IPA or isopropanol) is a
compound with the chemical formula CH3CHOHCH3.
It is a colourless, flammable chemical compound with a B
strong odour. As an isopropyl group linked to a hydroxyl
group, it is the simplest example of a secondary alcohol,
where the alcohol carbon atom is attached to two other
carbon atoms. If consumed, Isopropanol is converted
into acetone in the liver, which makes it extremely toxic.
Often used for disinfecting skin an antiseptic. C

II. Methyl Alcohol (or Methanol): Chemical Formula –
CH3OH: Not for human consumption. If consumed,
can cause blindness and death. Methanol acquired the
name wood alcohol because it was once produced
chiefly by the destructive distillation of wood. Today, D
methanol is mainly produced industrially by
hydrogenation of carbon monoxide.
III. Ethyl alcohol, (also known as Ethanol and abbreviated
as EtOH), is a colourless, volatile, and flammable liquid
that is soluable in water. Its chemical formula is C2H6O, E
or can be written as C2H5OH or CH3CH2OH. It has
one methyl (-CH3) group, one methylene (-CH2-) group,
and one hydroxyl (-OH-) group.”
The first two categories are poisonous, toxic and fatal for human
consumption, rendering its use only for industrial purposes. It is stated F
that Isopropanol and methanol, because of their inherent chemical
properties, cannot be purified and used for the production of ‘intoxicating
liquor’ or ‘potable liquor’ by adopting ‘physical means’ like decantation,
filtration, redistillation, fractional distillation etc. The third category namely,
Ethyl Alcohol or Ethanol (in India is usually produced from molasses
G
derived from sugarcane) in its concentrated form and it is also known as
“Rectified Spirit” and its strength measured in LPL signifies the strength
of alcohol by volume, 13 parts of which weigh exactly equal to 12 parts
of water at 51 degrees Fahrenheit.

H
1086 SUPREME COURT REPORTS [2019] 8 S.C.R.

A 9. Be that as it may, rectified spirit after it undergoes certain
‘physical changes’ by adopting ‘physical means’ like re-distillation,
rectification (repeated or fractional distillation) to remove impurities, it
becomes purer and is known as Extra Neutral Alcohol (ENA). Thereafter,
by addition and mixing of colouring and flavouring agents (compounding),
as well as after dilution with water, ENA is left for maturation, to be
B
bottled and used as ‘intoxicating liquor’ or ‘potable liquor’ known as
Indian Made Foreign Liquor (IMFL). Whereas the country liquor, also
known as ‘Desi Sharab’ is prepared from rectified spirit or low grade
ENA having alcohol content below 40% (as decided by different State
Governments) which may be coloured (by caramel) and may be spiced
C too. Notably, the chemical composition of Ethyl alcohol or Ethanol
(C2H6O or C2H5OH or CH3CH2OH) remains the same in the entire
process, though addition of colouring and flavouring agents makes it a
mild concoction/mixture/solution (in chemical parlance a solution of
alcohol is known as ‘tincture’) which renders it more palatable to human
consumption.
D
10. We have adverted to the above-mentioned process, noted in
the written submissions filed by the appellant, so as to give proper
interpretation to the impugned notification and the subject rules, in
particular Rule 106(Tha). English version of the said rule noted in the
notification (as translated by the official translator of this Court
E reproduced in paragraph 2 above), in our opinion, makes it amply clear
that the levy or impost fructifies only upon completion of distillation process
(in two stages- first from rectified spirit to ENA and then from ENA to
IMFL) and in particular converting into a final product “IMFL”. The
collection of impost is, however, deferred until the bottling of that product.
F In other words, the levy is not at the stage of import of rectified spirit
within the State; nor at the stage of initial distillation thereof to Extra
Neutral Alcohol (ENA) and not until the product IMFL is ready for
bottling as such. Thus, the levy under the impugned rule ripens or fructifies
only after the original raw material (imported rectified spirit) has
undergone distillation process at two different stages and transmute and
G mutate into an intoxicant or potable alcohol palatable to human
consumption, but its (impost) collection is effected just before bottling it
in that form (potable liquor). Indeed, the levy predicated in this rule is on
the total quantity of imported rectified spirit utilised for mutating it in the

H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1087
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

form of IMFL, a new produce. The last part of the rule stipulates the A
quantum of charges to be levied on such utilized imported rectified spirit
for production of the foreign liquor. For that limited purpose, the quantity
of imported rectified spirit utilized in the production of potable liquor, is
reckoned.
11. Reading the impugned provision as a whole and line by line or B
word by word in this perspective, it must follow that the substance of the
provision is to levy charges on the product IMFL produced or
manufactured by use of imported rectified spirit. In that sense, the levy
is not on the input (imported rectified spirit) of the final product as such
but is on the manufactured or produced product being potable alcohol
palatable to human consumption. For the purposes of computing the C
levy, the yardstick of Rs.6 per LPL on the total quantity of imported
rectified spirit utilized for production of IMFL is reckoned. Thus, the
impost is not on the imported rectified spirit as such but only on the
produced foreign liquor before it is bottled for sale in the wholesale or
retail market, as the case may be. If so understood, the whole edifice of D
the argument of respondents regarding the interpretation of the impugned
rule must collapse. For, the challenge to the impugned rule is on the
assumption that it permits the competent authority to levy charges on
the imported rectified spirit and not fit for human consumption but which
has the potency of being used for producing intoxicants or potable liquor
though exclusively meant for industrial purposes. Once that assumption E
is discounted or disregarded, nothing more survives for consideration.
We say so because, it is well established that the State may pass any
legislation in the nature of prohibition of potable liquor referable to Entry
6 and 8 of List II and may also laydown regulations to ensure that non-
potable alcohol is not diverted and misused as a substitute for potable F
alcohol. Had it been the case of levy on non-potable alcohol (imported
rectified spirit) per se, only then the question about the competency of
the State Legislature or the justness of the levy on the doctrine of quid
pro quo may become relevant. However, if it is a case of legislation in
respect of potable alcohol, as has been noted by us hitherto, the State
would be competent to legislate in that regard and levy charges – be it G
for regulating the same or impost for parting with its rights regarding
manufacture, storage, export, sale and possession thereof.

H
1088 SUPREME COURT REPORTS [2019] 8 S.C.R.

A 12. We may usefully advert to the Constitution Bench decision
(Five Judges) in Har Shankar and Ors. Vs. The Dy. Excise and
Taxation Commissioner and Ors.1, paragraph Nos.53 to 59, which
read thus:
“53. In our opinion, the true position governing dealings in
B intoxicants is as stated and reflected in the Constitution Bench
decisions of this Court in Balsara case2, Cooverjee case3 ,
Kidwai case4, Nagendra Nath case5, Amar Chakraborty case6
and the R.M.D.C. case7, as interpreted in Harinarayan Jaiswal
case8 and Nashirwar case9. There is no fundamental right to do
trade or business in intoxicants. The State, under its regulatory
C powers, has the right to prohibit absolutely every form of
activity in relation to intoxicants — its manufacture, storage,
export, import, sale and possession. In all their
manifestations, these rights are vested in the State and
indeed without such vesting there can be no effective
D regulation of various forms of activities in relation to
intoxicants. In American Jurisprudence, Vol. 30 it is stated
that while engaging in liquor traffic is not inherently unlawful,
nevertheless it is a privilege and not a right, subject to governmental
control (p. 538). This power of control is an incident of the
society’s right to self-protection and it rests upon the right
E of the State to care for the health, morals and welfare of the
people. Liquor traffic is a source of pauperism and crime
(pp. 539, 540, 541).
54. It was unnecessary in Krishna Kumar Narula case10 to
examine the question from this broader point of view, as the only
F contention bearing on the constitutional validity of the provision
impugned therein was not permitted to be raised as it was not
argued in the High Court. The discussion of the question whether
1
(1975) 1 SCC 737
2
1951 SCR 682 : AIR 1957 SC 414
3
G 1954 SCR 873 : AIR 1954 SC 318
4
1957 SCR 295 : AIR 1957 SC 414
5
1958 SCR 1240 : AIR 1958 SC 398
6
(1973) 1 SCR 533 : (1972) 2 SCC 442
7
1957 SCR 874 : AIR 1957 SC 699
8
(1972) 3 SCR 784 : (1972) 2 SCC 36
9
(1975) 1 SCC 29
H 10
(1967) 3 SCR 50 : AIR 1967 SC 1368
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1089
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

a citizen has a fundamental right to do trade or business in liquor A
proceeded in that case, avowedly, from a desire to clear the
confusion arising from the “different views” expressed by the
two Judges of the High Court. This may explain why the Court
restricted its final conclusion to holding that dealing in liquor is
business and the citizen has a right to do business in that commodity.
B
The Court did not say, though such an implication may arise from
its conclusion, that the citizen has a fundamental right to do trade
or business in liquor. If we may repeat, Subba Rao, C.J. said:
“We, therefore, hold that dealing in liquor is business and a
citizen has a right to do business in that commodity; but the
State can make a law imposing reasonable restrictions on the C
said right, in public interests.”
It is significant that the judgment in Krishna Kumar Narula
case does not negate the right of the State to prohibit
absolutely all forms of activities in relation to intoxicants.
The wider right to prohibit absolutely would include the D
narrower right to permit dealings in intoxicants on such
terms of general application as the State deems expedient.
55. Since rights in regard to intoxicants belong to the State,
it is open to the Government to part with those rights for a
consideration. By Article 298 of the Constitution, the E
executive power of the State extends to the carrying on of
any trade or business and to the making of contracts for
any purpose. As observed in Harinarayan Jaiswal case, (SCC
p. 44, para 13)
“if the Government is the exclusive owner of those privileges, F
reliance on Article 19(1)(g) or Article 14 becomes irrelevant.
Citizens cannot have any fundamental right to trade or carry
on business in the properties or rights belonging to the
Government, nor can there be any infringement of Article 14,
if the Government tries to get the best available price for its G
valuable rights.”
Section 27 of the Act recognises the right of the Government to
grant a lease of its right to manufacture, supply or sell intoxicants.
Section 34 of the Act read with Section 59(d) empowers the
Financial Commissioner to direct that a licence, permit or pass be
H
1090 SUPREME COURT REPORTS [2019] 8 S.C.R.

A granted under the Act on payment of such fees and subject to
such restrictions and on such conditions as he may prescribe. In
such a scheme, it is not of the essence whether the amount charged
to the licensees is pre-determined as in the appeals of Northern
India Caterers and of Green Hotel or whether it is left to be
determined by bids offered in auctions held for granting those
B
rights to licensees. The power of the Government to charge
a price for parting with its rights and not the mode of fixing
that price is what constitutes the essence of the matter.
Nor indeed does the label affixed to the price determine
either the true nature of the charge levied by the
C Government or its right to levy the same.
56. 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
D 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 governmental 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. The amounts charged to the
E 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
F in Forms 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
G 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.
57. While on this question, we may with advantage cite a passage
from American Jurisprudence (Vol. 30, pp. 642, 645) which is
H
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1091
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

based on the decisions in Gundling v. Chicago11, Phillips v. A
Mobile12 and Richard v. Mobile13, It says:
“the familiar principle that the imposition of licence fees on
useful and honourable occupations must not exceed the cost
of issuing the licence, plus the expense of inspecting and
regulating the business licensed ... is not necessarily applicable B
to a liquor license. The liquor traffic is not something which
is licensed for the purpose of promoting it. Indeed,
licence fees may be exacted in amounts intended to
discourage participation in the business. The courts have
quite generally refused to hold that the licence fee
imposed, merely because it is large, is a tax, where the C
object is to control, regulate, and restrict, and not to
encourage the liquor traffic, the revenue being the result
of the system and not the motive for its adoption . . . .
The higher the fee imposed for a licence, it is sometimes
said, the better the regulation, as the effect of a high fee D
is to keep out the business those who are undesirable,
and to keep within reasonable limits the number of those
who may engage in it.”
58. In the view we have taken, the argument that the Government
cannot by contract do what it cannot do under a statute must fail. E
No statute forbids the Government from trading in its own rights
or privileges and the statute under consideration, far from doing
so, expressly empowers it by Sections 27 and 34 to grant leases
of its rights and to issue the requisite licences, permits or passes
on payment of such fees as may be prescribed by the Financial
Commissioner. F

59. The argument that in Cooverjee case the impugned power
having been exercised in respect of a centrally administered area,
the power was not fettered by legislative lists loses its relevance
in the view we are taking. It is true that in that case it was
permissible to the Court to find, as in fact it did, that the fee imposed G
on the licensees was “more in the nature of a tax than a licence
fee”. As the authority which levied the fee had the power to exact
11
44 L Ed 728
12
52 L Ed 578
13
52 L Ed 581 H
1092 SUPREME COURT REPORTS [2019] 8 S.C.R.

A a tax, the levy could be upheld as a tax even if it could not be
justified as a “fee”, in the constitutional sense of that term. But
the “licence fee” or “fixed fee” in the instant case does
not have to conform to the requirement that it must bear a
reasonable relationship with the services rendered to the
licensees. The amount charged to the licensees is not a
B
fee properly so-called nor indeed a tax but is in the nature
of the price of a privilege, which the purchaser has to pay
in any trading or business transactions.”
(emphasis supplied)
C 13. Indeed, if the State legislation was to provide for levy on the
imported rectified spirit per se the same would be without jurisdiction,
as consistently held, including by the Constitution Bench in Deccan Sugar
& Abkari Co. Ltd. Vs. Commissioner of Excise, A.P.14, paragraph
No.2 of this decision, which reads thus:
D “2. It is settled by the decision of this Court in Synthetics and
Chemicals Ltd. v. State of U.P. that the State Legislature has no
jurisdiction to levy any excise duty on rectified spirit. The State
can levy excise duty only on potable liquor fit for human
consumption and as rectified spirit does not fall under that category
the State Legislature cannot impose any excise duty. The decision
E in Synthetics and Chemicals Ltd. v. State of U.P. has been
followed in State of U.P. v. Modi Distillery 15 where certain
wastage of ethyl alcohol was sought to be taxed. This Court
following the decision in Synthetics and Chemicals Ltd. came to
the conclusion that this cannot be done.”
F 14. The next question is whether the levy is in the nature of tax or
excise duty. If it is a case of excise duty on potable liquor produced by
use of imported rectified spirit, the State has jurisdiction to legislate in
respect of duty on the production or manufacture of such goods produced
or manufactured within the State. In the present case, we find merits in
G the submissions of the appellant State that the impost is neither in the
nature of a tax nor excise duty but it is towards the charges by whatever
name, for regulating the production of potable liquor to preserve public
health and morality including for parting with its rights or privileges

14
(2004) 1 SCC 243
15
H (1995) 5 SCC 753
THE STATE OF JHARKHAND & ORS. v. M/S AJANTA BOTTLERS & 1093
BLENDERS PVT. LTD. [A. M. KHANWILKAR, J.]

regarding manufacture, supply or sale of potable liquor or intoxicating A
liquor and to regulate the use of imported rectified spirit for production
and sale of potable liquor. In such a case, the State need bear no quid
pro quo to the services rendered to the licencee for production of foreign
liquor (IMFA).
15. The fact that the manufacturer-respondent has already obtained B
requisite licences for import of rectified spirit and production of foreign
liquor (IMFA) on payment of fixed rates does not mean that the State
has surrendered all facets of its rights in respect of every form of activity
in relation to potable liquor – its manufacture, storage, export, import,
sale and possession. The amended provision is an enabling provision
authorising the State to levy charges or impost for ceding its one or more C
of the activity in respect of foreign liquor (IMFL) produced by use of
imported rectified spirit. Such impost can be in addition to the general
power of the State to issue licence on payment of fees for production
and sale of potable liquor. As observed in Har Shankar (supra), in
paragraph No.56, the State need bear no quid pro quo to the services D
rendered to the licensees of producer of foreign liquor.
16. The respondent, however, placed heavy reliance on the decision
in State of U.P. & Ors. Vs. Vam Organic Chemicals Ltd. and Ors.16,
to contend that the State is obliged to justify the impost based on quid
pro quo. We are afraid, this decision is of no avail to the respondent. In E
that case, the Court was dealing with challenge to Rule 3(a) therein on
the ground that the State Legislature did not have legislative competence
to legislate on “denatured spirit” which is unfit for human consumption.
In that context, this Court relied on the decision in Synthetics and
Chemicals Ltd. and Ors. Vs. State of U.P. and Ors.17 and answered
the issue. If the case under consideration was to be regarding legislation F
on imported rectified spirit as such, this decision would have come handy.
However, having opined that the purport of the impugned Rule 106(Tha),
is to permit impost on the final processed product being foreign liquor
“IMFL”, before bottling as fit for human consumption, the State has
jurisdiction to legislate on that subject and need bear no quid pro quo to G
the services rendered to the licencee of manufacturer of foreign liquor
(IMFL).

16
(2004) 1 SCC 225
17
(1990) 1 SCC 109 H
1094 SUPREME COURT REPORTS [2019] 8 S.C.R.

A 17. In view of the above, we do not intend to dilate on other
arguments and reported decisions pressed into service by the respective
parties. Suffice it to observe that the challenge to the amended Rule 106
(Tha), in our opinion, is unfounded and is based on erroneous assumption
that it purports to authorise the State to levy charges on the imported
rectified spirit as such. However, upon proper interpretation of the said
B
rule we hold that it purports to empower the State to levy charges on the
final processed product being foreign liquor (IMFL) manufactured by
use of imported rectified spirit. This appeal, therefore, ought to succeed.
18. Accordingly, we allow this appeal and quash and set aside the
impugned judgment and order of the High Court dated 25 th July, 2013
C passed in WP(T) No.7499 of 2012. The said writ petition stands
dismissed. All pending interim applications are disposed of. No order as
to costs.

Ankit Gyan Appeal allowed.
D

E

F

G

H