The Bombay High Court declared the treatment being given to the sole manufacturer of country liquor, whose average production was below the threshold of 10 lakh cases and whose actual production was in excess of such threshold, as arbitrary. Accordingly, the Court held that the discrimination against manufacturers whose production exceeded 10 lakh cases in 2016-17, only because their preceding three-year average production had been below 10 lakh cases, is irrational.
Emphasising that the licence fee is a fee payable for the privilege of legitimately carrying out the activity for which a licence is necessary by law, the Court observed that the privilege in question covered by the CL-1 (Country Liquor) Licence was the production of country liquor for the year 2016-17, and the basis for charging the licence fee, specifically, was the overall production in that year.
The Court pointed out that when the State has treated all producers of more than 10 lakh cases uniformly at the flat rate of Rs. 7 per case, then adopting a slab-wise layered application of the licence fee rate for the petitioner, holding it liable to pay for production in excess of 8,41,775 cases but up to 10 lakh cases, at the rate of Rs. 10 per case and for production in excess of 10 lakh cases at the rate of Rs. 7 per case, is irrational and devoid of any intelligible differentiating characteristic.
The Court therefore quashed the order by which the State imposed the additional licence fees, and directed the State to provide a refund or give credit to the petitioner manufacturer, for any excess amounts that the petitioner has had to pay in order not to have its CL-1 Licence cancelled.
A Single Judge Bench of Justice Somasekhar Sundaresan observed that where the production of any CL-1 License holder exceeds the three-year average, which formed the basis of paying the fees in advance, the fees payable are governed by the Notification issued under the Maharashtra Potable Liquor Rules, 1996.
At the same time, the Bench noted that the said notification does not differentiate between the slabs in which the CL-1 Licence holder was placed before the start of 2016-17. It simply provides that where the production exceeds the average, the licence holder would be liable to pay fees as per the prescribed rate per case, considering the overall production.
The Bench stated that, at first blush, the Notification dated January 30, 2016, would suggest that licence fees are chargeable at different rates for different components of the volume of production by CL-1 (Country Liquor) License holders. However, upon a careful review of the contents of the Notification, and the actual treatment given by the State to all CL-1 License holders, the Bench found that the State has charged all producers of above 10 lakh cases at the flat rate of Rs. 7 per case on the overall production.
However, in the present case, the petitioner sought differential treatment only because its average production over the preceding three years had been below 10 lakh cases, added the Bench while pointing out that the petitioner was the only existing license holder who had had a three-year production average of below 10 lakh cases before the start of 2016-17, and had exceeded the threshold in 2016-17.
Briefly, the dispute revolves around the interpretation of the Notification dated January 30, 1996, under the Maharashtra Potable Liquor (Periodicity and Fees for Grant, Renewal or Continuance of License) Rules, 1996. As per the Notification, for extension of existing licences for the manufacture of Country Liquor for 2016-17, licence fees had to be paid in advance based on the average production for the preceding three years.
As the petitioner had an average production of 8,41,775 cases in the three years preceding 2016-17, the licence fees in advance were paid based on the rate of Rs. 10 per case, aggregating to Rs. 84.17 lacs. Such payment led to the extension of the CL-1 License for the year 2016-17. Since the petitioner’s production would exceed 10 lakh cases, the petitioner notified the Commissioner of Excise that the fees payable by it would have to be computed at the rate of Rs. 7 per case. Eventually, by the end of 2016-17, the petitioner had produced 11,30,345 cases. Now, since the overall production was above 10 lakh cases, the licence fees liability was computed at Rs. 79.12 lacs.
Since an amount of Rs. 84.17 lacs was already paid, the petitioner requested a refund of Rs. 5.05 lacs, which was resisted by the State, and rather, the petitioner was asked to pay a licence fee liability of Rs. 24.94 lacs. The State also insisted that failure to make such additional payment would lead to cancellation of its CL-1 License. In response to the show-cause notice, the petitioner explained that the amounts payable under the Notification were amounts payable in advance, subject to adjustment if the production were to exceed the preceding three-year average production, taking into account the overall production. The State, however, passed an order imposing the license fees liability of Rs. 24.96 lacs.
The petitioner thereafter sought information on all CL-1 Licence holders whose three-year average production calculated in terms of the Notification was in excess of 10 lakh cases, along with details of the actual licence fees paid by them, under the Right to Information Act, 2005 (RTI Act). The State answered the query under the RTI Act by giving details of multiple license holders.
Appearances:
Senior Advocate Venkatesh Dhond, along with Advocates Akshay Patil, Aditya Bapat, Akshay Kamble and Neha Patil, for the Petitioner/ Taxpayer
AGP P.G. Sawant, for the Respondent/ State
