GOVERNMENT OF MAHARASHTRA v. M-S. DEOKARS DISTILLERY

Citation: [2003] 2 S.C.R. 852

Court: Supreme Court of India

Bench: V.N. KHARE, S.B. SINHA, AR. LAKSHMANAN

Judgment text

GOVERNMENT OF MAHARASHTRA -~ v. MIS. DEOKAR'S DISTILLERY MARCH I0, 2003 [V. N. KHARE, CJ. , S. B. SINHA AND DR. AR. LAKSHMANAN, JJ.

] Bombay Prohibition Act, 1949-Sections 58A, 49, 114 and 143(2)(4): Maharashtra Distillation ofSpirit and Manufacture ofPotable Liquor Rules, [966- Sections 17(12), 17(43): Maharashtra Country Liquor Rules, 1973-Sections 6(12), 6(36): Maharashtra Civil Services (Revised Pay) Rules, 1998: Constitution ofIndia, 1950-Seventh Schedule, List Il, Entry 8, Article 309 proviso thereto and Article 162: Excise supervision of manufacturer of potable and country liquor- Supervision charges-Paid in advance-Revision of pay scale of the supervising staff with retrospective effect-Demand ofdifferential amount- Whether permissible-At the time of obtaining licence undertaking by manufacturers to abide by all the Rules made under the Act-Held: The demand of supervision charges is permissible under Section 58A even retrospectively as the Section has no /imitation to the effect that costs are to be recovered only in advance-Right to deal in liquor not being afiindamental right, State has exclusive right/privilege in respect ofpotable liquor and can charge any reasonable expenses or consideration for permitting such activity by grant oflicence-Licensee having undertaken to abide by all reasonable orders under the Act, cannot wriggle out ofthe contractual liability voluntarily incurred-Del!

land notice also not liable to be challenged in absence of challenge to notification revising the pay scale and the administrative instruction to carry out the executivefanction under Section 58A-Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964-Rule 7. Respondent-companies were holding licence in Form PLL for manufacture of Indian made foreign liquor prescribed under the provisions of the Maharashtra Distillation of Spirit and manufacture of 852 ·-. GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY 853 Potable Liquor Rules, 1966 and also licence in Form CLL prescribed under the provisions of Maharashtra Country Liquor Rules, 1973 for manufacture oi Country liquor made under Bombay Prohibition Act, 1949. Under Section 58-A of the Act State Government is empowered to permit the manufacture and other related activities in respect of any intoxicant under the supervision of excise staff and cost of such staff is to be made to the State Government by the manufacturers.

The cost of such staff is required to be paid to the State Government by the licensee in advance as per Rule 17(12) of 1966 Rules and Rule 6(12) of 1973 Rules. The pay scales and other allowances of Government employees are fixed by the State Government. The Commissioner as empowered by the State Government, issues circulars for levy and recovery of supervision charges based on the pay scales and other allowances of the Government employees fixed by the State Government under the Rules and Government • Resolutions made under proviso to Article 309 of the Constitution of India, in respect of the excise staff posted for supervision. State Government by notification dated 10. 12. 1998 promulgated Maharashtra Civil Services (Revised Pay) Rules, 1998 under its power vested by Article 309 of the Constitution whereby the pay scales of Government employees were revised and fixed with retrospective effect. Thereafter by circular dated 30. 7.

1999 orders were issued for carrying out executive function under Section 58-A of the Act and Article 162 of the Constitution. Pursuant thereto demand notices were issued by appellant No. 4 to the respondent-companies to pay the differential amounts of cost of supervision on account of revision of pay scales with retrospective effect. Respondent-companies informed appellant No. 4 that they had p already paid the supervision charges in advance and hence were not liable to pay the differential amount as they would not be able to pass on the burden of the same to the purchasers. Appellant No. 4 rejected the reply and directed to pay the differential amount. Writ Petition was filed challenging the demand on the ground that the challenge sought to be raised by them to the impugned demand notices had already been concluded in their favour in the case of JE Bilimoria and Sons v. State of Maharashtra and Ors. , (1999) Mh. LJ (II) 1079, and the same was confirmed in Polychem Ltd. and Anr. v.

State ofMaharashtra and Ors. , (1998] 6 sec 196. State objected to the petition on the ground that the judgment in J. E. Bilimoria's case was no longer good law in view of the Full Bench judgment of the High Court in Mohan Meakin Ltd. and Anr. v. State ofMaharashtra and Ors. , (1993) Mh LJ (1)-13 Bilimoria 's case was overruled and the view taken by another Division Bench of High Court in Gustad Mayur Irani v. State ofMaharashtra, (1991) 51 ELT 232 (Born. ) was confirmed. High Court held that the case was squarely covered by decision in JE Bilimoria's case which was confirmed by Supreme Court in Polychem 's case and the State was bound by the Supreme Court decision. Therefore, the demand notices were quashed and set aside and hence the Writ Petition was allowed.

In appeal to this Court, the State contended that Polychem 's case was distinguishable; that to recover the cost of supervision as per the pay scales " of its employees from the licensees is an executive function of the State Government under Section SSA of the Act and Article 162 of the Constitution which is carried out by circular issued by the Commissioner and, therefore, it is not a case of any lugislation imposing liability with retrospective effect by a delegated authority; that factually there was no effective representation to the licensee that the cost of supervision charges for the incoming quarter was fixed for the said quarter and will not be increased with retrospective effect; that the respondent was not and is not prevented from recovering this additional cost from his further sales; that the judgment in Polychem 's case was required to be read with decision in Mohan Meakin 's case in which earlier decision in Bilimoria 's case was overruled.

Respondent-companies contended that appellants while issuing .. demand notices did not consider the fact that the excise duty was to be levied on the basis of manufacturing cost and supervision charges which formed part of the manufacturing cost and that the fact that the manufacturing cost was ultimately to be passed on to the customers, . ___,, therefore, the manufacturers are not in a position to recover, when the goods are already issued for sale and released from warehouse; that appellants were not entitled to recover supervision charges retrospectively; that the term "cost of the supervision charges" is not that equivalent to salaries or wages; that the question of law raised in the case has already been decided in the Polychem 's case; and that when it has been conclusively held by High Court that the rule making authority did not have the power GOVT OF MAHARASHTRA v.

DEOKAR'S DISTILLERY 855 to recover the supervision charges retrospectively, the appellants cannot rely on any rules enacted by any rule making authority to justify the retrospective demand which had been struck down by High Court. Allowing the appe. il, the Court HELD: Per Dr. AR. lakshmanan, J (For himselfand VN. Khare, CJ) I. There exists full power under Section SSA of Bombay Prohibition Act, 1949 to levy and recover all costs of supervision and, therefore, no limitation can be read into the power to recover all costs present, future and past which are/or were actually incurred by the State Government in view of payments made/to be made to its employees posted for excise supervision, in spite of provisions of Rule 17(12) of Maharashtra .. Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966 and Rule 6(12) of Maharashtra Country Liquor Rules, 1973.

As per the wellsettled rule of interpretation that the words in a provision are to be given their normal meaning as understood by the common man or by the trade .

• as well as the widest meaning unless there is any limitation in that provision itself, the words "the cost of such staff shall be paid to the State Government" used in Section SSA of the Prohibition Act would include in their meaning all the costs incurred by the State Government for the purpose of disbursing pay and other allowances to the Government employees posted for supervision, whether recovered in advance or in due course the additional amounts which become recoverable on account of upward revision of pay scales with retrospective effect, because there is no limitation of any kind in Section SSA of the Prohibition Act to the effect that the costs are to be recovered only in advance, and that too only such costs as could be worked out on the date of demand or to the effect that the burden of additional amounts on account of revision of pay scales with retrospective effect should not be recovered from the liquor licensee. [SS2-G, H; SS3-A-C[ 2.

The question of application of principle of promissory estoppel would not arise as for administrative convenience only the costs are calculated and recovered in advance from the licensee. Therefore, Rule 17(12) of the Rules of 1966 or under Rule 6(12) of the Rules of 1973 could not be construed as an effective representation that no further cost would be recovered when provision under Section SSA of the Prohibition Act is clearly to the effect that the licensee has to bear the entire cost of the supervisory staff. Rule 17(12) of the Rules of 1966 and Rule 6(12) of the [2003) 2 S. C. R. Rules of 1973 providing for recovery of supervision charges in advance, do not direct that differential amounts are not to be recovered, if pay scales are revised. On the other hand, the aforesaid Rules are to be read with other provisions giving residuary powers in both the sets of Rules viz.

Rules 17(43) of the Rules of 1966 and Rule 6(36) of the Rules of 1973, which direct that the licensee shall comply with all orders issued under the Prohibition Act and Section 11 of the Prohibition Act clearly provides that the State Government may permit business in liquor subject to the manner and to the extent provided by the provisions of this Act or any Rules, Regulations or orders made or in accordance with the terms and conditions of the licence, permit, pass or authorization granted thereunder. 1883-D, GI 3. In the present case, the licensees gave an undertaking at the time of obtaining grant or renewal of the licence in the application form itself, .. both under the Rules of 1966 and the Rules of 1973, that they would abide by all orders made under the Prohibition Act and the Rules.

Under Rule 17(43) of the Rules of 1966 and under Rule 6(36) of the Rules of 1973, there are resideuary power of making a demand in special circumstances not foreseen in Rule 17(12) of the Rules of 1966 or Rule 6(12) of the Rul:es of 1973. It is seen from Rule 17(43) of the Rules of 1966 that the licensee shall abide by all the Rules, Regulations and orders made from time to time under the Act. A similar provision also exists under Rule 6(36) of the Rules of 1973. The object of Section SSA of the Prohibition Act and the intention of the Legislature could not be anything other than that the entire cost incurred by the Government on account of pay-scales paid to the Government employees posted for supervision should be paid by the licensee and that this cost should not be met from the Government exchequer. (884-D-F) 4.

The legal licensee does not have a fundamental right to deal in liquor under Entry 8, List II in the Seventh Schedule to the Constitution of India and thereby under Sections 49 and 143(2)(u) of the Prohibition Act, the State has the exclusive right/privilege in respect of potable liquor and the State can charge any reasonable expenses or even consideration for permitting such activity by grant of licence and that respondents ought fo comply with all reasonable orders as undertaken by them while obtaining the licence. Once the liquor licensee has undertaken to abide by all reasonable orders under the Prohibition Act while obtaining the licence, they cannot wriggle out of the contractual liability voluntarily incurred by. them. [885-A-CJ GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY 857 5.

The impugned demand notice was also in the nature of demanding balance of the price of the exclusive privilege which would become final only on issue of the Notification order under Article 309, the bulk of which have already been recovered in advance, which privilege exclusively vests with the Government considering effect of provisions especially Section 49 and Section 143(2)(u) of the Prohibition Act. The establishment charges demanded are in the nature of price for parting with the privilege to permit manufacture and sale of liquor, and the privilege exclusively vests with the Government. (885-D, El Government ofAndhra Pradesh v. Mis. Anabeshahi Wine p:nd Distilleries Pvt. Ltd. , (1988) 2 SCC 25, relied on. 6. The impugned demand notice was nothing but final settlement of accounts communicated by appellant No.

4, one contracting party to the other contracting party, the respondents, in terms of the contract executed between them, which is executed at the time of grant/renewal of the licence. The contract is executed after the licensee gives the undertaking in the application in Form PLA prescribed under the Rules of 1966 or the licence in Form CLA prescribed under the Rules of 1973, to abide by directions/ orders and complies all other requirements and when the application is accepted by the appellants by grant/renewal of the licence. The respondents/licensees, therefore, cannot wriggle out of the contractual obligation of payment of the entire cost of supervision regarding which they receive a final account or bill through the impugned demand notice and, therefore, the respondents ought to pay the amount demanded. (887-E-GJ 7. What the respondents agreed to pay was the price of an exclusive privilege which the State parted with in their favour.

They cannot, 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. The respondents, must fail in their contention both on account of the objection to the maintainability of the appeals and on merits concerning the nature of the payment which they are liable to make. (887-H; 888-A-BJ 8. The judgment of this Court in Polychem 's case was delivered on the basis of a concession by the Government advocate that supervision charges are collected only in advance, when under the residuary powers under Rule 17(43) of the Rules of 1966 and Rule 6(36) of the Rules of 1973, additional amounts were or could be demanded, as also directly under Section SSA and Section 114 of the Prohibition Act. ISS6-G, HI Polychem ltd. and Anr. v. State ofMaharashtra and Ors. , 1199S! 6 SCC 196, distinguished. JE. Bilimoria and Sons v.

State of Maharashtra and Ors. , 119901 Mh. L. J. (II) 1079, disapproved. Gustad Mayur Irani v. State ofMaharashtra and Ors. , 119911 (SI) 232 (Born. ) and Mohan Meakin Ltd. and Anr. v. State ofMaharashtra and Ors. , (19931 Mh. L. J. (I) 13, approved. Income-tax Officer v. M. C. Ponnoose, AIR (1970) SC 3SS; State Bank ofHaiyana and Ors. v. Jage Ram and Ors. , (19SOJ 3 SCC S99 and Assistant Collector Central Excise v. National Tobacco Co. , AIR (19721 SC 2563, referred to. 9. High Court is not right in quashing the demand notice issued by appellant No. 4, without examining the validity of or quashing Maharashtra Civil Services (Revised) Pay Rules, 199S and the consequential circular letter dated 30. 7. 1999 issued by appellant No. 2, since the demand notice was merely a consequential communication issued in furtherance of the Rules of 199S and the circular letter dated 30. 7. 1999. The statutory provision under Article 309, namely, the Notification dated I0. 12.

199S and the consequential administrative instructions/orders issued for carrying out the executive function under Section SSA of the Prohibition Act and Article 162 namely, the circular letter dated 30. 7. 1999 had not been challenged by the respondents herein and, therefore, they were not entitled to challenge the demand notice which was merely a consequential communication. ! SS7-B-DJ Per SB. Sinha, J (Dissenting) I. I. Although a citizen has no fundamental right to carry on trade or business in potable liquor, but when he is permitted to carry on such business, he would be entitled to claim equal right as against other citizens. In absence of the State imposing any prohibition or monopolizing the business, the same may be carried on by the licensee without being subjected to any discrimination. Such a right although may not be elevated to the status of a fundamental right but all the same it is a right. ISSS-G I GOVT. OF MAHARASHTRA v.

DEOKAR'S DISTILLERY 859 Khoday Distilleries ltd. v. State of Karnataka, 119951 I SCC 574, referred to. 1. 2. Section 58A of the Act mandates that the cost of the excise supervision would be borne by the licensees. The mode and manner of realization of such costs, however, has been laid down only in the Rules and/or the conditions of the licence. Such cost of excise supervision does not constitute 'tax' or 'fee' but a part of the price for grant of exclusive privilege to the licensee for carrying on his business. The price required - to be paid is, thus, a contractual one. The charges, thus can be levied either prior to entering into contract or during the currency thereof. 1889-B, CJ 1. 3. By reason of the provisions of the Rules or terms of conditions of licence, the demand on account of excise supervision charges was to be made in advance.

The State is entitled to fix the cost of supervision charge from time to time but the same has to be done during the currency of contract and not thereafter as there does not exist any contract to the contrary. [890-B, CJ 1. 4. Interpretation of a statute, it is trite, must be made on a conjoint reading of the Act, Rules made thereunder as also the terms and conditions of the licence. Section 58A of the Act does not provide for the mode and . manner for recovery of the cost cf excise supervision. It has been provided for in the Rules as also the conditions of licence. The rule when validly made forms part of a statute. It cannot be said that a statutory rule can be ignored on the ground that the same was made only for administrative purposes. It cannot further be said that the conditions of the licence can be interpreted in such a manner so as to impose upon the licensee a burden which was not contemplated at the time when licence had been granted and/or during the currency thereof.

1890-D, El Government ofAndhra Pradesh v. Mis. Anabeshahi Wine and Distilleries Pvt. Ltd. , [1988! 2 SCC 25, relied on. 1. 5. The option of the licensee to take or not to take a licence, would, thus depend upon the price which was to be fixed. The risk involved in the matter may be reasonably certain. A licensee before entering into a contract is entitled to know what price he has to pay for the grant of exclusive privilege or what are the risks involved in it. A price, thus, must be predetermined and cannot be redetermined and/or demanded after period of four years of the expiry of the licence. (891-El 1. 6. The rights and obligations of the parties to a contract are mutual. Both the State and the Licensee are bound by it. When a contract is a statutory one, the terms and conditions of a statute, the statutory rules would govern the contract.

A court of law shall not for the purpose of interpretation of the terms of the contract read the provisions of statute in such a way as a result whereof additional liability may be imposed on party to the contract. [891-GI Assistant Excise Commissioner and Ors. v. Issac Peter and Ors. , [1994[ 4 SCC l 04, referred to. 1. 7. The reason why a manufacturer must have a fair knowledge about his liability for obtaining a licence would be that he may during the currency of the licence fix the price of liquor in such a manner so that all charges payal;>le by him may be passed on to the consumers. Such costs cannot be recovered after the demands are made long after the contract has been worked out. It will be preposterous to suggest that the liability in respect of the increased costs of excise supervision for one licensing year can be passed on to his consumers after four years or more. [891-H; 892-A] 1. 8.

A party to a statutory contract is bound to discharge his obligations in terms of the provisions of the Act, Rules or conditions of licence as they stood. He is also entitled to enforce his rights. No executive order, can be issued after a long time to fasten a new liability upon the licensee particularly when grant of licence for each year would result in a separate contract which may not only provide for a different price but also different terms and conditions as well as the mode and manner in which the rights of the parties thereto are required to be exercised and/ or the obligations are to be discharged, more so when one contracting party has no say therein. By reason of an executive act a liability cannot be created with retrospective effect. The said rule shall squarely apply also in relation to a statutory contract. Furthermore, the statutory authority has been enjoined with a duty to follow the mode as regards recovery of the costs of excise supervision.

The mode and manner thereof having been fixed, the statutory authorities ordinarily must follow the procedure laid down therefor. [892-C-E[ 1. 9. State in pursuance of its welfare activities may increase the pay of its employees with retrospective effect but such burden cannot be passed on to a licensee by an unilateral act on its part. For enforcing the same, there must be a contract to the contrary. 1892-F[ ' . "" GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY 86J 1. 10. It may be true that under the rules or conditions of licence, the licensee is bound to comply with the provisions of the Act, rules and regulations and conditions of the licence but such undertaking and/or liability comes to an end with the cessation of contract. 1893-D) 1. 11. State of Maharashtra did not expressly protect themselves that the respondents must pay any amount by way of increase in wages pursuant to or in furtherance of the recommendations made by the Fifth Pay Commission with retrospective effect.

Having not done so, they are not entitled to claim the same from the licencees. 1895-D-EI 1. 12. A definite price is an essential element of a binding agreement and although a definite price need not be stated but assertion thereof either by reason of express reason or implied reason is imperative. [897-B] 1. 13. An act on the part of the State to increase wages of its I employees is a welfare act. When such increase takes place with ' retrospective effect the validity thereof can be upheld only because it is for the benefit of the employees. Such a beneficial act on the part of the State, however, would not bind a third party. An increase in wages by the State with retrospective effect was an unilateral act on the part of the State. If it was intended to be passed on by the State to the respondent the same ought to have been the subject matter of a specific contract so as to avoid the uncertainty of the terms of contract as contemplated under Section 20 of the Indian Contract Act.

The rule of construction of a contract is that if the terms of the agreement are so vague and indefinite that it may not be ascertained with reasonable certainty as regards intention of the parties, the same would not be enforceable at law. Meaning of a contract must be clear on its face. In any event, in the instant case, the contract p had been worked out. Once the contract had been worked out, a fresh liability cannot be thrust upon a contracting party. 1897-D-FJ Black Diamond Beverages and Anr. v. Commercial Tax Officer, Central Section Assessment Wing, Calcutta and Ors. , 11998j 1 SCC 458, relied on. Conway Brothers and Savage v. Mulhern and Co. , (Limiled) Vol. XVII (1900-1901) The Times Law Reports 730; American Commerce Company (Limited) v. Frederick Boehm (Limited), Vol. XXXV 1918-19 The Times Law Reports 224; Occidental Crude Sales Inc. v. Latsis, (1976 Vol. 2 Lloyd's LR 412 and Love v. Norman Wrighl (Builders) Limited Law Reports, (1944) lKR~~re~redm.

Halsbury 'slaws ofEnglana: 4th Edition, Volume 41; Halsbury's Laws of England, Fourth Edition, Reissue, referred to. 2. There is no rule of practice or precedent that where a Bench of the High Court is faced with two conflicting views; one rendered by this Court and another by a Full Bench of the same High Court; both have to be read together. In fact both can't be so read unless the decisions are such which can be explained and the ratio of one may be held to be not applicable in the fact of the matter. In the instant case, the views of the full Bench and this Court are diametrically opposite and thus both the c! ecisions could not have been given effect to simultaneously by reading them together or otherwise. 1897-G, H; 898-A, BJ CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7399 of . , 2001. ' From the Judgment and Order dated 9. 8. 2000 of the Mumbai High Ir Court in C. R. P. Nos. 3754 of 2000. WITH C. A. No. 7400/2001 and 1302 of 2003. Soli J. Sorabjee, Attorney General, U. U.

Lalit, S. S. Shinde, Arun Pednekar and V. N. Raghupathy for the Appellants. V. B. Joshi, for the Respondent. The Judgment of the Court was delivered by AR. LAKSHMANAN, J. These three appeals are diiected against the final judgment and order passed by the High Court of Judicature of Bombay in Writ Petition Nos. 3754/2000, 3753/2000 and 3898/2000.

The common questions that arise in these appeals are as to whether the State ofMaharashtra is empowered to charge from the liquor licencees, under the Bombay Prohibition Act, 1949 (hereinafter referred to as "the Prohibition Act"), at whose premises Government staff is posted for supervision as perthe provision of Section 58A, are governed by the Maharashtra Civil Services (Revised Pay) Rules, 1998 and other rules, resolutions made by the State Government under the power vested in it by the proviso to Article 309 of the Constitution, to fix the pay and other allowances of its employees, for levy and recovery of the cost of supervision to be paid to the State Governiiient as contemplated GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J] 863 under Section 58A of the Act or not?

The further question may also arise as to whether the Commissioner is entitled to recover the supervision charges retrospectively and raise demands for, inter alia, arrears of supervision charges as per the circular letter No. SUC I091/197/Revised/I.!. 96/13-A dated 30. 7. 1999 for carrying out provisions of Sections 58A and 114 of the Prohibition Act and carrying out an executive function under Article 162 of the Constitution and/or a lawful order under the Act, falling under Sections 58A and 114 of the Prohibition Act or Rule 17(4n of the Rules of 1966 and Rule 6(36) of the Rules of 1973? The respondents are holding a licence in Form P. L. L. for manufacture of Indian made foreign liquor, prescribed under the provisions of the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966 (hereinafter referred to as "the Rules of 1966") and also holds a licence in Form C. L. J.

prescribed under the provisions of the Maharashtra Country Liquor Rules, 1973 (hereinafter referred to as "the Rules of 1973") for manufacture of Country liquor, made under the provisions of the Prohibition Act. All transactions pertaining to receipt, transport, storage of spirit and manufacture, bottling and issues of the liquor manufactured are required to be under excise supervision under both of the aforesaid 5ets of Rules. Under Section 58A of the Prohibition Act, the State Government is empowered to permit the manufacture and other related activities in respect of any intoxicant under the supervision of excise staff and the cost of such staff is to be paid to the State Government by the manufacturer. The cost of such staff is required to be paid to the State Government by the licensee in advance as per sub-rule (12) of Rule 17 of the Rules of 1966 and sub-rule (12) of Rule 6 ofthe Rules of 1973.

The pay scales and other allowances of Government employees are fixed by the State Government by issue of Rules and Government Resolutions under the power vested in it by the proviso to Article 309 of the Constitution of India. The Commissioner, as empowered by the State Government, issues circulars for levy and recovery of supervision charges based on the pay scales and other allowances of the Government employees fixed by the State Government under the Rules and Government Resolutions made under Article 309 in respect of the excise staff posted for supervision. Demand notices were issued by appellant No. 4 - the Sub-Inspector of State Excise to the respondents to pay the differential amounts of cost of supervision on account of revision of pay-scales with retrospective effect ordered vide Government Notification, Finance Department dated I0. 12. 1998, as per the revised pay scales for one Sub-Inspector and two constables.

By the aforesaid Notification, the State of Maharashtra had promulgated, under the power vested in it by the proviso to Article 309 of the Constitution, the Maharashtra Civil Services (Revised Pay) Rules, 1998 (hereinafter referred to as "the Rules of 1998"), whereunder the pay scales of Government employees were revised and fixed with retrospective effect from 1. 1. 1996. It was pointed out that because of the increase in the cost of supervision with effect from 1. 1. 1996, vide aforesaid Notification dated I0. 12. 1998, on account of revision of pay scales and transport charges of the employees posted for supervision, it was necessary to increase the said charges, which should be paid by the respondent within 15 days. The respondent, vide his letter dated 2. 3.

1999, informed the Sub- Inspector that he had already paid the supervision charges in advance, he would not be able to pass on the burden of the differential amount to his purchasers and that he was not liable to pay the differential amount. By reminder letter dated 24. 3. 2000, appellant No. 4 rejected the reply of the respondent and directed him to pay the differential amount. The respondent questioning the above letter, preferred Writ Petition No. 3754/2000 in the Bombay High Court contending that, inter alia, in view ofthe decision of this Court in Polychem Ltd and Anr. v. State ofMaharashtra and Ors. reported in [l 998J 6 sec 196, the demand notice was liable to be quashed and set aside. The appellants filed a reply to the writ petition and denied the contention of the respondent herein.

The writ petition came up for admission before the High Court and the learned Judges observed that they were allowing the petition at the stage of admission itself in view of the judgment in Po/yehem's case (supra), without considering the submissions of the appellants that on certain facts and aspects the ratio ofthe Polychem judgment was not applicable to the case of the respondent, as set out in the affidavit in reply. However, learned counsel appearing for the respondents herein, contended before the High Court of Bombay that the challenge sought to be raised by them to the impugned demand notices has already been concluded in their favour in the case of JE. Bilimoria & Sons v. State ofMaharashtra and Ors. reported in 1999 Mh. L. J. (JI) 1079, wherein a similar issue was considered by the Division Bench and it was held therein that the demand notice of the differences of the supervision charges with retrospective effect was without jurisdiction.

Thus, the notice -in that case was quashed and set aside. Learned counsel further contended that the aforesaid judgment of the High Court of Bombay in JE. Bilimoria 's case (supra) has been confirmed by this Court in the case of Polychem (supra) wherein this Court was pleased to hold that the payment of supervision charges with retrospective effect was without jurisdiction and the impugned demand of differences of supervision charges retrospectively could not be sustained. Learned counsel appearing for the respondents therein (appellants herein) contended that the judgment of the Division Bench of the , GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J. ] 865 Bombay High Court in the case of JE. Bilimoria (supra) was no longer a good law in view of the Full Bench judgment of the said Court in the case of Mohan Meakin Ltd. and Anr. v. The State ofMaharashtra and Ors. reported in 1993 Mh. L. J. (1) 13.

The Full Bench while resolving the conflict did not approve the view taken in the case of J. E. Bilimoria (Supra) and overruled the same and confirmed the view of another Division Bench of the High Court of Bombay in the case of Gustad Mayur Irani v. The State of Maharashtra reported in 1991 (51) ELI 232 (Born. ) [W. P. No. 940/1982]. It was, therefore, submitted that the ratio of the decision in J. E. Bilimoria 's case (supra) has no application in the facts and circumstances of the present case. It was further contended that under Section 58A ofthe Prohibition Act, the State Government has the power to recover from a licensee a cost of the staff appointed to supervise the licensed premises for excise purposes. The Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964 (hereinafter referred to as "the Rules of 1964) also provide that the State Government can recover from the licensees the cost of staff appointed at the licensed premises/ bonded warehouse for excise supervision.

It was further urged that condition No. 3 of the licence requires the petitioners to pay such amount of cost as determined by the respondents, appellants herein, in advance before the beginning of every quarter. This condition is merely for administrative convenience and it does not prevent the State Government from recovering the cost of such staff subsequently, especially when both Section 58A of the Prohibition Act as well as Rule 7 of the 1964 Rules do not prescribe any time within which such cost has to be recovered. It was further contended that in view of the application of recommendations of the Fifth Pay Commission, the Dearness Allowance and other emoluments payable, inter alia, to such supervisory staff have been increased with effect from 1. 1. 1996 and the cost of supervision charges has proportionately gone up and this is to be recovered from the licensee. It was further submitted that. the increased cost, however, has to be determined from 1. 1.

1996 because of the retrospective raise granted to the staff by the Government and that the licensee do not have any say in the salary and other emoluments paid to such staff. It was also contended that under Section 58A of the Prohibition Act and the relevant Rules, there is clear existing statutory liability on the licensees to pay the cost of the supervisory staff and what is sought to be recovered from the respondents herein is the increased cost of such supervision which has been taken place from 1. 1. 1996 and the demand was made when the cost increased. The Division Bench held that the case on hand is squarely covered by the decision of the Bombay High Court in JE. Bilimoria 's case (supra) and that the view taken by the Bombay High Court has been confirmed by this Court in Polychem 's case (supra) wherein it was held that the State Government is not empowered to collect supervision charges with retrospective effect under the Prohibition Act.

The Division Bench held that they are bound by the aforesaid view taken by this Court and, therefore, they have no other alternative but to quash and set aside the demand notices issued by respondent No. 4 dated 22. 3. 2000 and 19. 2. 2000 in W. P. No. 3753/2000 and W. P. No. 3754/2000 respectively. The writ petition was allowed and the rule made absolute in terms of prayer clause (a) in both the petitions with no order as to costs. Aggrieved by the orders passed by the Bornbay High Court in the above writ petitions, these appeals by way of special leave petitions were filed by the Government of Maharashtra and others reiterating the contentions raised before the Bombay High Court. We heard Mr. Soli J. Sorabjee, learned Attorney General, appearing for the appellants and Mr. V. B. Joshi, learned counsel, appearing for the respondents.

The learned Attorney General submitted that the High Court erred in solely relying upon the judgment passed by this Court in the case of Po/yehem (supra) without considering the distinguishing facts and circumstances, as submitted by the appellants in the case of the respondents and without considering certain other decisions of this Court on the basis of which these appellants had submitted that the ratio of Polychem 's judgment was not applicable to the case of the respondents. He further submi~ed that the High Court erred in not appreciating the proper effect of the concerned provisions and directions under the Act and under the Constitution which have to be considered together with relevant statutory provisions and the consequential directions. The learned Attorney General invited our attention to Sections 11, 12, 13 and 49 of the Act, which read as under: "11.

Notwithstanding anything contained in the following provisions of this Chapter, it shall be lawful to import, export, transport, manufacture, bottle, sell, buy, possess, use or consume any intoxicant or hemp or to cultivate or collect hemp or to tap any toddy producing tree or permit such tree to be tapped or to draw toddy from such tree or permit toddy to be drawn therefrom in the manner and to the extent provided by the provisions of this Act or any rules, regulations or orders made or in accordance with the terms and conditions of a GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J. ] 867 licence, permit, pass or authorisation granted thereunder. 12. No person shall- (a) manufacture liquor; (b) construct or work any distillery or brewery; (c) import, export, transport or possess liquor; or (d) sell or buy liquor. 13.

No person shall- (a) bottle any liquor for sale; (b) consume or use liquor; or (c) use, keep or have in his possession any materials, still, utensils, imp1ements or apparatus whatsoever for the manufacture of any liquor. 49. Notwithstanding anything contained in this Act, the State Government shall have the exclusive right or privilege of importing, exporting, transporting, manufacturing, bottling, selling, buying, possessing or using any intoxicant, hemp or toddy, and whenever under this Act or any licence, pennit, pass, thereunder any fees are levied and collected for any licence, pennit, pass, authorisation or other permission given to any person for any such purpose, such fees shall be deemed to include the rent or consideration for the grant of such right or privilege to that person by or on behalf of the State Government.

" Our attention was also drawn to sub-section (1) of Section 114, subsection (1), Clause (u) of sub-section (2) of Section 143 and Section 58A of the Prohibition Act read prior to 18. 5. 1998 which run as follows: "114(1) All duties, taxes, fines (except fines imposed by a Court) and fees leviable under any of the provisions of this Act or in respect of any licence, permit, pass or authorisation granted under it, and the cost of the supervising staff appointed under Section 58-A, may be recovered from any person liable to pay the same or from his surety, if any, as if they were arrears of land revenue. 143(1) The State Government may make rules for the purpose of carrying out the provisions of this Act or any other law for the time being in force relating to excise revenues.

(2) In particular and without prejudite to the generality oftl}e foregoing provisions, the State Government may make rules,- (u) prescribing the fees (including rent or consideration) payable in respect of any privilege, licence, permit, pass or authorisation granted or issued under this Act. 58A.

The State Government may by general or special order direct that the manufacture, import, export, transport, storage, sale, purchase, use, collection or cultivation of any intoxicant, denatured spirituous preparation, hemp, mhowra flowers, or molasses shall be under the supervision of such Prohibition and Excise or Police staff as it may deem proper to appoint, and that the cost of such staff shall be paid to the State Government by the person manufacturing, importing, exporting, transporting, storing, selling, purchasing, using, collecting or cultivating the intoxicant, denatured spirituous preparation, hemp, mhowra flowers or molasses: Provided that, the State Government may exempt any clause ofpersons or institutions from paying the whole or any part of the cost of such staff. " It is useful, in this context, to refer to the relevant Rules, which read as follows: "2(3) "Excise supervision" means the supervision of foreign liquor in relation to its receipt.

issues, transport and storage in bond by member of the staff of the Prohibition and Excise Department appointed in that behalf by the Commissioner. 7. Appointment of staff - The Commissioner may appoint such staff at the bonded warehouse for excise supervision as he deems necessary and the cost of such staff shall be paid to the State Government by the licensee as provided by an order under Section 58A of the Act. " CONDITION NOS. 3,10,l l & 12 OF THE LICENCE IN FORM B. W. l GRANTED UNDER THE RULES OF 1964: 3. The licensee shall pay to the State Government, in advance, at the beginning of each quarter commencing from the date of the licence, GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J] 869 such cost ofthe staff appointed at the licensed premises for the purpo~e of excise supervision as may be fixed by the Commissioner frol:n time to time. 10.

No foreign liquor shall be removed by the licensee from the licensed pre111ises for consumption within the State except with previous permission of the Collector, in writing and on payment of excise duty and fees and under a pass granted under the Maharashtra Foreign Liquor (Storage and Supply) Regulations 1964. Provided that, foreign liquor may be removed in bond by the licensee from his licensed premises for supply to another license holding a B. W. I license in the State, under a pass granted by the Collector under the Maharashtra Foreign Liquor (Storage and Supply) Regulations, 1964. 11. The license shall abide by the conditions of this licence and the provisions of the Bombay Prohibition Act. 1949, and the rules, regulations and orders made thereunder. 12. The licensee shall obey all lawful orders issued from time to time by the Commissioner, the Collector or the Superintendent of Prohibition and Excise.

The inaugural part of the Maharashtra Civil Service (Revised Pay) Rules, 1998. In exercise of the powers conferred by the proviso to Article 309 of the Constitution of India, the Governor of Maharashtra is pleased to make the following rules namely: I. Short title:- These rules may be called the Maharashtra Civil Services (Revised Pay) Rules, 1998. Sub-rule (12) of Rule 17 of the Rules of 1966: All transactions pertaining to the receipt, transport, storage of spirit and manufacture, bottling and issues of potable liquor shall be under excise supervision. The Director may appoint such staff at the manufactory for excise supervision as is considered necessary and the cost of such staff shall be paid to the State Government by the licensee annually in advance. Sub-rule (12) of rule 6 of the Rules of 1973: All transaction pertaining to the receipt, transport and storage of spirit and country liquor and manufacture, bottling and issues of country liquor shall be under excise supervision.

The Commissioner shall, according to the direction made under Section 58A of the Act by the State Government, station such staff at the Manufactory for excise supervision as is considered necessary and the cost of such staff shall be paid to the State Government by the manufactory licensee quarterly in advance. Sub-ru! e (43) of Rule 17 ofthe Rules of 1966 under which the license in Form P. LL has been granted to the respondent reads as under The licensee shall abide by all rules, regulations and orders made from time to time under the Act. Under sub-rule (I) of rule 15 and sub-rule (2) of Rule 16 of the Rules of 1966, the applicant/licensee, has to give following undertaking in the application for grant or renewal of the licence to manufacture liquor, in the application in Form P. L. A.

prescribed under the Rules of 1966 for grant/renewal of the licence: I/We agree to abide by the terms and ·conditions of the licence which may be granted/renewed, and the provisions ofthe Bombay Prohibition Act, 1949 and the rules, regulations and orders made thereunder. Sub-rule (36) of rule 6 of the Rules of 1973: 6(36) A manufactory licensee shall abide by all rules, regulations and orders made from time to time under the Act. In the application form C. L. A. prescribed under rules 3(1) and 4(2) of the Rules of 1973, for grant/renewal of the C. L. I licence, the applicant/licensee has to give the following undertaking: 4. I/We agree to abide by the terms and conditions of the licence which may be granted/renewed, and the provisions of the Bombay Prohibition Act, 1949, and the rules, regulations and orders made thereunder. Condition No. 17 of the licence in Form C. L. I.

prescribed under the Rules of 1973, which is granted to a manufacturer of country liquor: The licensee shall abide by the conditions of this licence and the provisions of the Bombay Prohibition Act, 1949, the rules, regulations GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, JJ87 J and orders made thereunder and shall given an undertaking to that - effect in Form CL. XX. Undertaking in Form CL. XX prescribed under condition No. 17 of the licence in Form C. L. I. prescribed under the Rules of 1973: "I/We. hereby undertake to abide by the conditions of the licence in Form CL. I. that may be granted/renewed in my/our favour and the provisions of the Bombay Prohibition Act, 1949 and the Maharashtra Country Liquor Rules, 1973 and other relevant rules, regulations and orders made thereunder from time to time. Signature of the licensee/applicant" Learned Attorney General drew our attention to the Notification dated 10. 12.

1998 issued by the Finance Department of the Government of Maharashtra which runs as follows: "GOVERNMENT OF MAHARASHTRA FINANCE DEPARTMENT Mantralaya, Mumbai 400 032, dated 10th December, 1998 NOTIFICATION No. RPS 1298/C. R. 13/98/SER-10- In exercise of the powers conferred by the proviso to Article 309 ofthe Constitution of India, the Governor of Maharashtra hereby makes the following rules, namely:- 1. Short title and commencement (i) These rules may be called the Maharashtra Civil Services (Revised Pay) Rules, 1998. (ii) They shall be deemed to have come into force on the 1st day of January, 1996. " Learned Attorney General contended that the High Court of Bombay erred in not appreciating the true nature ofthe levy and recovery of supervision charges and of the transaction between the State Government and the licensee in respect of levy and recovery of supervision charges under Section 58A of the Prohibition Act.

He further submitted that the basis on which the levy on cost of supervision was governed and the nature of the levy and recovery through executive orders were not put in issue in Polychem 's case (supra). It also does not appear to have been brought to the notice of this Court that the pay scales which were revised with retrospective effect under the 'Maharashtra Civil Services (Revised Pay) Rules, 1998 (hereinafter referred to as "the Rules of 1998") were made by the State of Maharashtra under the powers vested in it by the proviso to Article 309 and the levy and recovery of cost of supervision from the licensee was through executive instruction based on the aforesaid Rules of 1998. It was also submitted that the question as to whether the word "cost" was used in Section 58A of the Prohibition Act as meaning "fee" in the technical sense was not canvassed in the Polychem 's case (supra).

According to the learned Attorney General, to recover the cost of supervision as per the pay scales of its employees from the licensees is an executive function of the State Government under Section 58A of the Prohibition Act and Article 162 of the Constitution, which is carried out by issuing circular letter dated 30. 7. 1999 issued by the Commissioner and, therefore, it is not a case ofany legislation imposing liability with retrospective effect by a delegated authority. It was argued that the licensees were well aware that they have to pay additional amounts periodically at least about once or twice in a year on account of retrospective revision of various allowances and which they had paid and, therefore, factually there was no effective representation to the licensee that the cost of supervision charges for the incoming quarter was fixed for the said quarter and will not be increased with retrospective effect.

Quoting the circular letters, it was argued that the said letters establish that there was no question of any remote circumstance of increase in cost of supervision with retrospective effect in the case of the respondent including other licensees and, therefore, the High Court has erred in applying the ratio of the Polychem 's case (supra) to the case of the respondent on the facts of the case submitted for consideration with reference to the above quoted circular letters according to which recovery of additional amounts towards arrears of supervision charges was effected during the previous years.

Learned Attorney General further submitted that the respondent was not and is not prevented from recovering this additional cost from his further sales as observed by the Full Bench of the Bombay High Court in paragraph 13 of the judgment in Mohan Meakin 's case (supra) and which view was not before this Court in the case of Polychem (supra) and, therefore, the High Court ought to have appreciated that ratio ofthe Polychem's judgment (supra) was, therefore, not applicable to the case of the respondents on facts as well GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J. J 873 as in law. Learned Attorney General, in support of his contentions, placed strong reliance on the following judgments: I. Government of Andhra Pradesh v. Mis. Anabeshahi Wine and Distilleries Pvt. Ltd reported in (1988] 2 sec 25 (delivered on 16. 2, 1988). 2. JE. Bilimoria & Sons v. State ofMaharashtra and Ors. reported in 1990 Mh. L. J. (II) 1079 (delivered on 1. 8. 1989). 3. Gustad Mayur Irani v.

State ofMaharashtra and Ors. reported in 1991(51) ELT 232(Bom. ) (delivered on 12. 9. 1990). 4. Mohan Meakin Ltd and Anr. v. State of Maharashtra and Ors. , reported in 1993 Mh. L. J. (I) 13 ( Full Bench judgment delivered on 8. 9. 1992). 5. Mis Vidarbha Wine Traders v. State of Maharashtra and Ors. , delivered by the High Court of Bombay on 24. 2. 1994. 6. Order dated 5. 9. 1994 passed by this Court in S. L. P. (C)No. 15159- 15167/1994 (CC2653 I) (Vidarbha Wine Traders and Ors. v. State ofMaharashtra). 7. Polychem Ltd. and Anr. v. State ofMaharashtra and Ors. reported in (1998) 6 sec 196 (delivered on 4. 8. 1998) Placing reliance on the above cited rulings, the learned Attorney General, submitted that the High Court ought to have appreciated that the judgment of this Court in Polychem 's case was required to be read with the decision of the Full Bench of the High Court in Mohan Meakin's case in which the earlier decision in JE.

Bilimoria's case was overruled on entirely different reasons than those given in the judgment of the High Court in Gustad Mayur ! rani's case, in Writ Petition No. 2718/1991 Mis. Vidarbha Wine Traders v. State ofMaharashtra and Ors. and order dated 5. 9. 1994 ofthis Court rejecting the Special Leave Petition (c) No. 15159-15167/1994 (CC 26531) filed by Mis Vidarbha Wine Traders and 15 other licensees. It was further submitted that the various reasons in Mohan Meakin 's case upholding the demand for recovery of differential amounts of supervision charges were not rejected on the basis of any discussion by the High Court in the impugned judgment. Mr. V. B.

Joshi, learned counsel appearing for the respondents, in reply, submitted that the appellants while issuing demand notice did not consider the fact that the Excise duty is to be leviea on the basis of manufacturing cost and supervision charges which form part of the manufacturing cost and that the fact that the manufacturing cost is ultimately to be passed on the customers and, therefore, the manufacturers are not in a position to recover when the goods are already issued for sale and released from warehouse. He further submitted that the appellants are not entitled to recover the supervision charges retrospectively and that the supervision charges are paid well in advance at the beginning of every quarter and without payment of those charges, no manufacturing activities could be carried out. It was further submitted that the term "cost ofthe supervision charges" is not that equivalent to salary or wages and that the demand notice is without authority of law.

He further urged that the appellants cannot recover the amount arbitrarily which is not just and proper and that since the demand notice is not legal and not maintainable, the same is not binding upon the respondents and, therefore, the respondents are not liable to pay the same and, therefore, the High Court of Bombay has rightly quashed the demand notice issued by the appellants. Mr. V. B. Joshi further urged that the question of law raised in the special leave petition is no longer res integra and it has been decided against the appellants in Polychem 's case (supra). By these appeals, the appellants seek review of the aforesaid judgment of this Court long after the said judgment has become final. It was further submitted that it is totally incorrect for the appellants to submit that the decision of this Court in Polychem 's case (supra) is liable to be read with the decision of the Full Bench of the High Court of Bombay in the case of Mohan Meakin (supra).

It was further submitted that the Full Bench decision of the Bombay High Court upheld the view taken by the Division Bench of the same High Court in Gustad Mayur ! rani's case (supra), wherein it has been held that the liability to pay the supervision charges and the quantum of two different concepts that the liability is not imposed with retrospective effect but merely reduced are revised with retrospective effect. According to the learned counsel, in Polychem 's case (supra), this Court had considered the judgment of the Division Bench in Gustad Mayur Irani 's case (supra) as well as the conflicting judgments of the Division Bench of the same High Court in the case of J. E. Bilimoria (supra). In other words, although the Full Bench judgment in Mohan Meakin "s case (supra) was not brought to the notice of this Court while deciding the same question raised in Polychem 's case (supra). The reasoning given in Custad Mayur irani 's case (supra) was considered and rejected by this Court.

It was, therefore, submitted that in deciding Polychem 's case (supra), this Court has impliedly overruled the decision of the High Court in Mohan Meakin "s case '(. ' . GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY (AR. LAKSHMANAN, J. ] 875 (supra) and that the contention of the appellants that the said judgment of this Court is liable to be read with Mohan Meakin's case (supra) is without merit and deserves to be rejected. Mr. V. B. Joshi further submitted that when it has been conclusively held by the High Court that the rule making authority does not have the power to recover the supervision charges retrospectively, the appellants cannot rely on any rules enacted by any rule making authority to justify the retrospective demand which has been struck down by the High Court of Bombay. Before proceeding further to consider the rival submissions, it would be beneficial to consider the various judgments cited by the learned Attorney General in its chronology.

The first in the series is the judgment of this Court in the case of Mis Anabeshahi Wine and Distilleries Pvt. Ltd (supra). In this case, the respondent-Distillery obtained a distillery licence under the Andhra Pradesh Distillery Rules, 1970 and has been carrying on the business of manufacture and sale of wine and other allied products. The excise authorities posted one Inspector, one Sub-Inspector and four Constables at the respondent's factory premises and re9ulred the respondent to pay their salaries and allowances etc. in pursuance of Section 28(2) of the Andhra Pradesh Excise Act, i 968. The respondent-Distillery having failed to get any redress, filed writ petition challenging the demand on various grounds. The contentions raised on behalf of the respondent-Distillery found favour with the High Court which, by the judgment appealed against allowed the respondent's writ petition.

In this Court, it has been urged by the State Government that the High Court committed an error in appreciating the true nature of the demand and the demand was in the nature of price for pa1iing with the privilege which privilege exclusively vested with the Government, Having considered the respective submissions, this Court accepted the submission made by learned counsel for the appellant-State. Before this Court, it has not been disputed that the business which the respondent has been carrying on could not have been carried on by it unless licence had been granted to it under the said Act and the Rules. This Court, after considering the rival submissions, observed in paragraph 5 which runs as follows: "The perusal of the aforesaid provisions of the Act and the Rules leaves no manner of doubt that it was open to the appellant to grant the exclusive privilege of manufacturing and selling wine etc.

to the respondent only provided it was, apart from making any other payment, also willing to pay the salaries and allowances referred to in the aforesaid provisions which for the sake of convenience have been 876 [2003] 2 S. C. R. described as establishment charges, and which were sought to be recovered as such under the impugned notice of demand. The respondent-Company was not under any obligation to take the licence. It was open to it to have refrained from taking any licence under the Act and the Rules if it was not willing to pay the price as required by the Government for the grant of privilege to manufacture and sell intoxicants. The nature of the payment which a licensee such as the respondent is required to make to the State by reason of the State parting with the privilege in regard to manufacture sale etc. of ·intoxicants came up for consideration before a Constitution Bench of this Court in Har Shankar v. Deputy Excise and Taxation ·Commissioner.

It was held that the amounts charged to the licensees are neither in the nature of tax nor excise duty, but constituted the price or consideration which the government charges to the licensees for parting with its privileges and granting them to the licensees. " In the case of J. E. Bilimoria (supra), the judgment was delivered on 1. 8. 1989 by the Nagpur Bench of the Bombay High Court. Seventeen writ petitions were filed challenging the authori1y ofthe respondent-State to recover excise duty on breakages caused in transit or in the Bonded Warehouse, by recourse to the circulars issued by the Commissioner of Prohibition ,and Excise and the difference in the suq,ervision charges leviable under Section 58A of the Prohibition Act.

With regard to the supervision charges, it was urged that Section 5SA of the Prohibition Act vested the State Government with the power of imposing supervision charges in respect of the goods mentioned therein by the persons who were engaged in the concerned activity, and since Section 58A of the Prohibition Act imposed the liability, it was open to the State Government to vary the quantum, taking into account the .. circumstances, and it was not necessary to have a clear provision for recovering i the amount and no question ofretrospective operation of the rule or provision arose in these circumstances.

The grievance ofthe petitioners before the High Court was thai the supervision charges have actually been recovered much in excess of the actual salary of the staff employed in the licensed premises and that because there were revisions in salary of Government servants and some audit objections were raised, the respondents started taking action for recovery of supervision charges with retrospective effect from 5. 5. 1970 on the strength of the circular dated 7. 4. 1981. The Bombay High Court held that neither of these provisions clothe the State Government or the Commissioner with the authority to charge the supervision charges with retrospective effect. Obviously, when Section 58A of the. Prohibition Act uses the words "the cost of such GOVT. OF MAHARASHTRA i ! " \1AHARASHTRA v. DEOKAR'S DISTILLERY [S. B. SINHA, J. ] 897 The said decision has been followed by this Court in Black Diamond Beverages and Anr. v. Commercial Tax Officer, Central Section, Assessment Wing, Calcutta and Ors.

, [1998] I SCC 458. It is well-settled that a definite price is an essential element of a binding agreement and although a definite price need not be stated but assertion thereof either by reason of express reason or implied reason is imperative. In para 59 of Hals bury's Laws ofEngland, Fourth Edition, Reissue, the law is stated thus : "59. Adjustment of contracts on changes in customs or excise duties or value added tax. Whoever may be liable and on whatever event for the payment of customs or excise duty or VAT, the amount of the duty is usually passed on to the buyer as part of the price. " An act on the part of the State to increase wages of its employees is welfare act. When such increase takes place with retrospective effect the validity thereof can be upheld only because it is for the benefit of the employees. Such a beneficial act on the part of the State, however, would not bind a third party.

An increase in wages by the State with a retrospective effect was an unilateral act on the part of the State. If, it will bear repetition to state, if it was intended to be passed on by the State to the respondent ! ht. same ought to have been the subject matter of a specific contract so as to avoid the uncertainty of the terms of contract as contemplated under Section 29 of the Indian Contract Act. The rule of construction of a contract is that if the terms of the agreement are so vague and indefinite that it may not be ascertained with reasonable certainty as regard intention of the parties, the same would not be enforceable at law. Meaning of a contract must be clear on its face. In any event, in the instant case, the contract had been worked out. Once the contract had been worked out, a fresh liability cannot be thrust upon a contracting party.

--- It is now accepted that the decision of the Full Bench of the Bombay High Court in Mohan Meakin 's case was not brought to the notice of the Bench deciding Po/ychem. The parties referred to two conflicting views of the High Court. This Court applied its mind and approved the judgment rendered by the Division Bench in Bilimoria 's case. There is no rule of practice or precedent that where a' Bench of the High Court is faced with two conflicting views; one rendered by this Court and another by a Full Bench of the same High Court; both have to be read together. In fact both can't be A so read unless the decisions are such which can be explained and the ratio of one may be held to be not applicable in the fact of the matter. In the instant case, the views of the Full Bench and this Court are diametrically opposite and thus both the decisions could not have been given effect to simultaneously by reading them together or otherwise.

B For the aforementioned reasllns, I am of the opinion that the impugned judgment cannot be faulted. These appeals are therefore, dismissed. K. K. T. Appeals allowed. ----