State Empowered To Levy Charges On Foreign Liquor (IMFL) Manufactured By Use Of Imported Rectified Spirit: SC [Read Judgment]

The Supreme Court has held that the State of Jharkhand is empowered to levy charges on foreign liquor (IMFL) manufactured by use of imported rectified spirit.

The bench comprising of Justice AM Khanwilkar and Justice Ajoy Rastogi set aside the Jharkhand High Court judgment which had held otherwise and held that the challenge to the amended Rule 106 (Tha) framed under under section 90 of the Jharkhand Excise Act, 1915,  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.

The court in State of Jharkhand vs. Ajanta Bottlers & Blenders Pvt. Ltd noted that, if the State legislation was to provide for levy on the imported rectified spirit per se the same would be without jurisdiction, as held by the Constitution Bench in Deccan Sugar & Abkari Co. Ltd. vs. Commissioner of Excise, A.P. Upholding the validity of the Rule, the bench said:

"The amended provision is an enabling provision authorising the State to levy charges or impost for ceding its one 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 (supra), in paragraph No.56, the State need bear no quid pro quo to the services rendered to the licensees of producer of foreign liquor."

.. 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 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."

The bench also agreed with the submission made by the 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 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 the licencee for production of foreign liquor, it added. 

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