SOLOMON ANTONY AND ORS. versus STATE OF KERALA AND ORS.

Citation: [2001] 2 S.C.R. 53 · Decided: 22-02-2001 · Supreme Court of India · Bench: A.S. ANAND · Disposal: Dismissed

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Judgment (excerpt)

)... 
SOLOMON ANfONY AND ORS. 
v. 
STATE OF KERALA AND ORS. 
FEBRUARY 22, 2001 
[DR. A.S. ANAND, C.J., S. RAJENDRA BABU AND 
R.C. LAHOTI, JJ.] 
Excise l.Aws : 
Kera/a Abkari Shops (Disposal in Auction) Rules, 1974: 
Rule 8( 1) (as amended in 1993)-Rectified spirit-Import of-
Countervailing duty-Levy of-Pennits granted to contractors to import or 
purchase designated quantum of duty-paid rectified spirit-Such rectified spirit 
could be obtained either from the distilleries within the State or from those 
outside the State-Godowns were allowed to be opened to store rectified spirit 
or manufactured arrack on payment of prescribed annual rent-Demand of 
excise duty raised on rectified spirit-Rate of excise duty also increased-
Validity of-Held: Excise duty on the designated quantum of rectified spirit is 
payable as a consideration for parting with the privilege of vending arrack-
Duty payable on unlifted quota of rectified spirit is part of the amount payable 
as 'kist'-Hence, levy of excise duty justified-KeralaAbkari Shops (Disposal 
in Auction) Amendment Rules, I 993, R.8-Kerala Abkari Act, Ss. 17 and I 8. 
The appellants-contractors were granted permits for import or 
purchase of designated quantum of duty-paid rectified spirit under Rule 
8(1) of the Kerala Abkari Shops (Disposal in Auction) Amendment Rules, 
1993. The contractors/licensees could obtain the duty-paid rectified spirit 
either from the distilleries in the State or from those in other States. The 
contractors were allowed to open godowns to store duty-paid rectified 
spirit and for storage of manufactured arrack on payment of prescribed 
annual rent. 
The appellant-contractors filed writ petitions before the High Court 
challenging the demand, and the increase in the rate, of excise duty on the 
designated quantity of rectified spirit. The appellants contended that the 
A 
B 
c 
D 
E 
F 
G 
levy of excise duty on rectified spirit not actually imported was violative of 
Sections 17 and 18 of the Kerala Abkari Act; that the increase in the rate 
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53 
54 
SUPREME COURT REPORTS 
[2001] 2 S.C.R. 
A 
of excise duty was arbitrary; that no rectified spirit was produced in the 
State and, therefore, levy of countervailing duty was impermissible in law. 
A 
The High Court dismissed the writ petitions. Hence this appeal. 
~ 
Dismissing the appeal, the Court 
B 
HELD : 1. Permit is granted to the contractors to import or pur· 
chase a designated quantum of duty-paid rectified spirit and excise duty on 
the designated quantum of rectiiied spirit has to be paid each month which 
will be utilised for the purpose of manufacture of arrack and the 'kist' 
amount payable would include the excise duty on the designated quantum 
of rectified spirit. It means that the consideration for parting with the 
.. 
c 
privilege of vending arrack would include the consideration equivalent to 
excise duty on the rectified spirit. Therefore, if the contractors with their 
eyes wide open have accepted the terms of payment of consideration of the 
'kist' inclusive of an amount equivalent to excise duty on rectified spirit, 
-+ 
D 
there is no substance in the appellants' argument that the excise duty 
payable even by way of 'kist' is in the nature of a tax or levy and not 
leviable under law by the State. The duty payable on unlifted quota of 
rectified spirit is also part of the amount payable as 'kist' on the desig· 
nated quantity. [61-A-C; DJ 
E 
2. The contractors are required to pay the consideration payable to 
~ 
the State for sale of the liquor, namely, arrack and by importing desig· 
nated quantity of rectified spirit in respect of which the consideration 
payable is equivalent to excise duty. Thus the High Court is justified in 
holding that the contractors are bound to pay the amount which is a 
F 
measured excise duty payable on the designated quantum of rectified spirit 
in terms of Rule 8 of the Kerala Abkari Shops (Disposal in Auction) Rules, 
1974 and had undertaken in the agreements executed by them. (63-B-C] 
State of Haryana v. !age Ram, (1980] 3 SCR 746; State of A.P. v. Y. 
Prabhakara Reddy, [1987) 2 SCC 136; State of Rajasthan v. Nandlal, [1993) 
G 
Supp. 1 SCC 681, relied on. 
Synthetics and Chemicals Ltd. v. State of U.P., (1990) 1 SCC 109, held 
inapplicable. 
.... 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4726-4728 
H · of 1994. 
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SOLOMON ANTONY v. STATE [RAJENDRA BABU, J.] 
55 
From the Judgment and Order dated 30.3.94 of the Kerala High Court 

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