SHREE KRISHNA GYANODAY SUGAR LTD. versus STATE OF BIHAR

Citation: [1996] SUPP. 4 S.C.R. 680 · Decided: 14-08-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Case Partly allowed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
SHREE KRISHNA GYANODAY SUGAR LTD. 
v. 
STATE OF BIHAR 
AUGUST 14, 1996 
[S.P. BHARUCHA AND S.B. MUJMUDAR, JJ.] 
Excise Law: 
Bihar and Orissa Excise Rules, 1919 : Rule 9. 
Excise staff and establishment "to the charge of a distillery''-Power of 
coriunissioller to appoint alld levy establishment cost Oil distillery-Held: llot 
ultra vires the provisions of Act-Power could be traced to S. 38(1)(a)(ii) r/w. 
sub-sections (J)(a) Gild 9(i) & (ii) of Act-Bihar excise Act, 1915, S. 38( l)(a), 
90(i)(a) & (9), 13, 15 and 49. 
Rule 9 (first pmt)-Excise officers and establishment "to the charge of 
a distillery''-Appointment oHfeid : words "to the charge of a distillery" 
meant to be ill charge or control of distille1y alld not at the cost of distille1y. 
Rule 9 (second pwt)-Applicability of-collditions for-Excise staff and 
establish Oil distillery 'licensed solely for purposed of manufacture of dena-
tured spirit or any other commercial spi1it'-Levy of cost of-Held: distilleries 
licensed for mallufactu1ing de11atured spirit or other industrial spirits unfit for 
human collsumption along with potable liquor fit for humall consumptioll do 
not fall withill the ambit of secolld part of Rule 9-Word "or" ill expression 
"n1anufacture of denatured spi1it or any other conunercial spirit' could not be 
read as 'and'-171e succeeding words '
1any other conunercial spbit
11 would get 
colour from preceding words" dellatured spirit". 
The appellants were licencees in respect of distilleries for manufac-
G ture of potable spirit and denatured spirit or commercial spirit. Tbe 
appellants were granted licences by the State under Bihar Excise Act, 1915. 
The Superintendent of Excise directed the appellants to pay the estab-
lishment charges incurred over the excise staff posted at the appellants' 
distilleries. The said demand was raised under Rule 9 of the Bihar & 
H Orissa Excise Rules, 1919. The appellants filed writ in the High Court 
680 
SHREEKRISHNAGYANODAYSUGAR LTD. v. STATE 
681 
challenging the aforesaid demand which were dismissed. Being aggrieved A 
the appellants preferred the present appeal. 
On behalf of the appellants it was contended that Rule 9 of the Rules 
was ultra vires the provisions of the Act; and that since the appellants 
manufactured not only denatured spirit or commercial spirit but also 
potable spirit, the respondent-authorities had no power or jurisdiction to 
invoke Rule 9 of the Rules demanding establishment charges incurred on 
the excise staff posted at their distilleries. 
B 
On behalf of the respondents it was contended that Rule 9 of the 
Rules was clearly sustainable under Section 38 of the Act; that the words, C 
11denatured spirit or any other commercial spirit" as found in the second 
part of Rule 9 of the Rules could be read as "denatured spirit and any 
other commercial spirit" and if so read they would include even potable 
spirit manufactured by the appellants; and hence the distilleries run by 
the appellants were squarely covered by Rule 9 of the Rules. 
D 
Allowing the appeal in part, this Court 
HELD : 1. Power to regulate and supervise distilleries as engrafted 
in the first part of Rule 9 of the Bihar & Orissa Excise Rules, 1919 and 
also to levy establishment cost from these distilleries under second part 
of the Rule can squarely be traced to the statutory provisions of Section E 
38(i)(a) (ii) of the Bihar Excise Act, 1915 which entitle the Board of 
Revenue to impose suitable restrictions and conditions on the licences like 
appellants' distilleries who have to manufacture liquor pursuant to such 
licences subject to such restrictions and conditions as are imposed on 
them. Section 38(l)(a)(ii) read with Section 90 subsections (l)(a) and 9(i) 
F 
and (ii) represents a well-knit statutory scheme authorising the Board of 
Revenue to promulgate rules for laying down restrictions and conditions 
on the licencees, namely, the distilleries which could be validly subjected 
to such restrictions on their manufacturing activities before they get 
clearance for such activities under Section 15 read with Section 13 of the 
Act. It is, therefore, not possible to agree with the contention that Rule 9 
is ultra vires the provisions o( the Act or has no statutory coverage for its 
existence. It has to be kept in view that if a distillery which manufactures 
denatured spirit attempts to alter or alters any denatured spirit with the 
intention that such spirit may be used for human

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