High Court Seeks Delhi Govt's Response On Plea Challenging New Excise Policy Allegedly Permitting Auction Of Right To Collect Taxes

The Delhi High Court today directed the Delhi Government to file an additional affidavit in a plea challenging its new Excise Policy inasmuch as it allegedly permits auction of right to collect taxes.

Appearing before a Division Bench of Chief Justice DN Patel and Justice Jyoti Singh, Senior Advocate Dr. Arun Mohan for the petitioner, Delhi Liquor Traders Association, argued that since the license fee under the new policy is fixed, the revenue generated after recovery of such license fee will be pocketed by the retailers themselves, instead of going to the government corpus for welfare of the general public.

"Government of the day cannot give to a private citizen the 'Right to Collect Taxes' – and pocket them – not deposit them in the Consolidated Fund," the petition filed through Advocates Arvind Bhatt and Siddharth Sharma states.

The counsel illustrated as follows:

Suppose the sale price at the counter is Rs. 100 which is inclusive of cost, retailing expenses and margin, licence-fee, Excise and VAT. The notional cost is taken at Rs. 30 and the license fee component is approximately Rs. 64. Remaining is the margin of the retailer.

He submitted that since the license fee is fixed, the same shall be recovered by the retailer upon sale of approximately 600 bottles. This the plea terms as 'Taxes Recouped Point', denoting the point (quantity of sales) by which all Taxes paid as part of Licence fee have been recouped and thereafter there is only profit, only token taxes. 

Mohan submitted that beyond the 600th bottle, the retailer will continue to charge the excise revenue, which is part of MRP, from the public. However, there would be no deposit into the consolidated fund of the state.

Thus, it was his case that the license fee component of every bottle sold after those 600 bottles, shall be pocketed by the retailer. "Suppose someone is selling 1,000 bottles. Bottle 601 onwards, remaining 400 bottles you are allowing license fee component to remain in pocket of retailer, not to govt corpus," he submitted.

Mohan added that his argument is not to reduce the price of liquor bottles thereafter. However, the license fee component for every bottle should go the government.

Hearing this, the Court asked the Delhi government to file an additional affidavit, explaining its stand on the above controversy.

Senior Advocate Rahul Mehra, appearing for the Delhi government, argued that the entire case of the petitioner is notional, based on hypothetical circumstances.

He submitted that in the earlier regime, the license fee component was miniscule and taxes were considerably high. However, in this model, the entire revenue has been subsumed in license fee with a 10% increase.

"Their case is that profit will be pocketed by the retailer if the license fee is recovered. It's a big 'if'," Anand Tiwari, Deputy Commissioner (Excise) submitted.

The matter has now been posted for January 11, 2022. Meanwhile, the Petitioner is also granted liberty to file an explanatory note/ affidavit in the matter.

Case Title: Delhi Liquor Traders Association v. GNCTD