EXCISE COMMISSIONER, U.P., ALLAHABAD versus RAM KUMAR

Citation: [1976] SUPP. 1 S.C.R. 532 · Decided: 05-05-1976 · Supreme Court of India · Bench: A.N. RAY · Disposal: Case Allowed

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Judgment (excerpt)

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EXCISE COMMISSIONER, U.P., ·ALLAHABAD 
v. 
RAM KUMAR 
May 5, 1976 
[A. N. RAY, C.J., R. S. SARKARIA, P. N. SHINGHAL 
AND JASWANT SINGH, JJ.J 
Evidence Act-Estoppe/ against Government in exercise of legislative, sovere-
ign or executive powers-U.P. Excil"e Act 1910-Sec. 24, 28, 31, 33, 40 fllld 41-
Whet!zer excise duty can be levied on unlifted stock of liquor. 
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U.P. Sales Tax Act 1948, Sec. 3A and 4-Whether exemption fronl payme11t 
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of sales tax can be withdrawn-Estoppel. 
The State of Uttar Pradesh bas under the U.P. Excise Act, 1910, the ex-
clusive right or privilegoe· of manufacturing and selling liquor in that 
State. 
Section 24 of the Act provides that subject to the provisions of s. 31 the Excise 
Commissioner may grant to any persOn a licence for the exclU5ive privilege 
of manufacturing or of supplying any country liquor etc. 
Section 31 provides 
for the conditions for the grant of licence. Section 33 invests the 
authority 
granting a licen~e to require the grantee to execute a counterpart agreement in 
conformity with the tenor of the licence. 
Section 28 authorises imposition of 
an excise duty or a countervailing duty by the local Government on any excis-
able article. Sections 40 and 41- of the Act empower the State Government and 
the Excise Commissioner subject to the previous sanction of the Government to-
make rules. 
Para 38 of the Excisei Manual which contains the rules made under 
the Act shows that there are 4 licence fee systems in vogue. One of such 
sySterns is the auction fee system uRder which the amount of licence fee is 
determined by competition amongst bidders at an auction. The respondents 
were the highest bidders at various auctions. Before holding the auctions, the 
rates of excise duty and prices of different varieties of country liquor and also 
the conditions of licence were announced. No announcement was made as to 
whether the exemption from sales tax in respect of sale of country liquor 
granted by the notification dated 6-4-1959 was or was not likely to be withdrawn. 
One of the conditions of the licences was that the licensee shall lift each month 
certain quota of liquor and on the failure to lift the monthly quota the licensee 
shall be liable, to pay compensation to the State Government calculatffi at the 
rate of duty per litre on the uhlifted quota. On the day following the day 
when the licences were granted, the Government of U.P. issued a notification 
under s. 3A and 4 of the U.P. Sales Tax Act, 1948, superseding the earlier 
notification exempting the: payment of sales tax and imposing sales tax on the 
turnover in respect of country spirit at the rate~ of 10 P. per rupee. The respon-
dents having failed to lift and sell the minimum quotas of liquor the appellant 
called upon them to pay by 
way of compensation the amounts of excise duty 
on the shortfalls. 
Aggrieved by the. demand, the -respondents mo\'ed the High Court under 
Art. 226 of the Constitution for issue of appropriate· writ or direction restraiaing 
the appellants from recovering the aforesaid amounts. The respondents 
in 
~pecial appeals also challenged the notification issued under the Sates Tax Act 
on the Q'round that the State Government did not announce at the time of the 
auction that the earlier notification was likely to be withdrawn and that the appel-
lant informed the respondents at the time of the auction that there was no sales 
tax on the sale of country liquor. The appe11allts were, therefore, estopped from 
making the demand in respect of the sales tax and recoverihg the same from them. 
The High Court allowed all the petitions in toto. 
On appeal by s~cial leave, 
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EXCISE COMMR. V. RAM KUMAR 
533 
HELD : (I) Neither s. 28 nor s. 29 nor any other provisions of the Act 
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authorise the levy_ of the, amounts SQUght to be recovered from the tespoIL".lents. 
The demand made by the appellant though disguised .,. compensatton is in 
reality a demand for excise du,ty on unlift<d quantity of liqu<ir which is not 
authorised by the provisions of the /'Ct. [538A-E] 
Bimal Chandra Banerjee v. State of Madhya Pradesh, [1971] I S.C.R. 844, 
followed. 
Panna Lal and Ors. etc. v. State of Rajasthan and others, [1976] 1 S.C.R. 
219, distinguished. 
Appeals dismissed. 
(2) Sections 3A and 4 of the U.P. Sales Tax Act clearly authorise the State 
Government to impOSe sales tax. The fact that sales of country liquors had 
been exempted from sa

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