M/S. K.C.P. LTD. versus GOVERNMENT OF A.P. & ORS.

Citation: [2015] 10 S.C.R. 70 · Decided: 12-08-2015 · Supreme Court of India · Bench: VIKRAMAJIT SEN · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
[2015] 10S.C.R. 70 
M/S. K.C.P. LTD. 
v. 
GOVERNMENT OF A.P. & ORS. 
(Civil Appeal No. 5020 of 2005) 
AUGUST 12, 2015 
[VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] 
Andhra Pradesh Rectified Spirits Rules, 1971 - rr.4, 
C 
13, 15- Rules (pertaining to rectified spirit (industrial grade) 
- Constitutional validity of - Requirement of obtaining a 
licence and payment of excise duty and pass fee for export 
of rectified spirit -
Challenge to -
Held: While State 
Governments are not competent to impose taxes/levies on 
D industrial alcohol, fee charged for services rendered to 
prevent the diversion and conversion of industrial alcohol 
for human consumption is permissible and legal - Such fee 
need not be charged strictly on quid pro quo basis and It will 
pass legal muster so long as it is not excessive - Thus, 1971 
E Rules themselves are not illegal- They are within the purview 
of the constitutional powers of the State Government- r. 4 on 
the administrative fee are essential to defray expenses 
incurred by State Governments to prevent the illegal 
conversion of industrial alcohol to potable alcohol - However, 
F r 15 dealing with the export of rectified spirit is struck down, 
since it imposes a tax, not a fee, on appellants and is outside 
the State's legislative competence - The purpose is not to 
prevent industrial alcohol from being diverted and converted 
to potable alcohol; their purpose is to regulate, control and 
G discourage the export of industrial alcohol - It has not been 
conclusively shown by State that it has been constrained to 
monitor or superintend that industrial alcohol is not illegally 
diverted to other uses within the State - If industrial alcohol 
H is exported outside the State as industrial alcohol, these 
70 
M/S. K.C.P. LTD. v. GOVERNMENTOFA.P. &ORS. 
71 
impositions partake of a totally different character; transfening A 
it into a tax. 
Synthetics & Chemicals Limited vs. State of U.P. 
1989 (1) Suppl. scR 623: (1990) 1 sec 109 -
referred to. 
Case Law Reference 
1989 (1) Suppl. SCR 623 
referred to. 
Para4 
B 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. C 
5020 of2005 
From the Judgment and Order dated 25. 04.2002 of the 
High Court of Judicature of Andhra Pradesh at Hyderabad in · 
Writ Petition No. 10874of1996 
WITH 
C. A. Nos. 5021-5022 of 2005 
Sanjay Parikh, Challa Guna Ranjan, Y. Rajagopala Rao, 
D 
Y. Vismai Rao, Hitender Nath Ratnam, Y. Raja Gopala Rao for E 
the Appellant. 
Prerna Singh, Guntur Prabhakar for the Respondents. 
The Judgment of the Court was delivered by 
F 
VIKRAMAJIT SEN, J. 1. The Appellants before us 
assail the impugned Judgment of the High Court of Andhra 
Pradesh, which had upheld the legality of Andhra Pradesh 
Rectified Spirits Rules, 1971 (1971 Rules for brevity) and had G 
found the requirement of obtaining a licence and the payment 
of Excise duty and Pass fee for exporting rectified spirit to be 
legal. 
2. The Appellants have distilleries which produce various 
grades of industrial alcohol from molasses, also known as ethyl 
H 
72 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A 
alcohol or ethanol. In exercise of powers conferred under 
Section 72 of the Andhra Pradesh Excise Act, 1968, the 
Respondent State enacted the 1971 Rules. Rules 4, 13 and 
15 are laid out herein for the facility of reference; although in 
B 
c 
D 
E 
F 
G 
H 
these Appeals it is Rule 15 which is in focus-. 
Rule 4: Rectified spirit shall not be issued from a 
distillery or a warehouse without pre-payment of 
·administrative fee meant for industrial purposes. In case 
of potable purposes, rectified spirit shall not be issued 
from a distillery or a warehouse without pre-payment of 
Excise Duty except when rectified spirit is moved in bound 
or when payment of Excise Duty has been exempted. 
Rule 13: (1) No person shall be granted license for 
possession and use of rectified spirit for industrial 
purposes unless the applicant: 
(a) deposits as security for the fulfillment of all the 
conditions of his license such sum as may be fixed by 
the Government from time to time which shall not be less 
than Rs. 15,000 in cash in the Government treasury; and 
(b) executes an agreement in Form R.S.-Vforpayment 
of the costs, charges and expenses including salaries 
and allowances of such· Excise staff as may be 
determined by the Commissioner or his nominee to be 
posted at the manufactory of the licensee in connection 
with the supervision to ensure compliance with the 
provisi
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