STATE OF BIHAR AND ORS. versus INDUSTRIAL CORPORATION PVT. LTD. AND ORS.

Citation: [2003] SUPP. 3 S.C.R. 362 · Decided: 04-09-2003 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Dismissed

Judgment (excerpt)

A 
B 
ST A TE OF BIHAR AND ORS. 
v. 
INDUSTRIAL CORPORATION PVT. LTD. AND ORS. 
SEPTEMBER 4, 2003 
[V.N. KHARE, CJ. AND S.B. SINHA, J.) 
Bihar Molasses (Control) Act, I 947: 
S.22-Rectified spirit manufactured from molasses-Shortfall in 
production reported by Comptroller and Auditor General-Penal duty 
C imposed by State Government on distillers to the extent of shortfall-
Distillers filing writ petitions-High Court setting aside the levy-Held, 
imposition of penal duty being against the principles of natural justice is 
illegal and void-No opportunity of any kind was afforded to the 
manufacturers before the demand as regards the penal duty was pressed 
D against them-Before creating a demand of penal duty or penalty, there 
was no adjudication by any authority as regards the breach committed by 
the distillers-The matter was not even examined as to what was the 
shortfall in the production of rectified spirit-The Act does not provide for 
imposition of such penalty in the event of shortfall of spirit-Bihar Excise 
E Act, 19 I 5-s.22-Administrative !aw-Principle of natural justice-Excise 
Law-Penal duty-Imposition of 
A. Mohammed Basheer v. State of Kera/a and Ors., (2003) 6 SCC 
159; General Manager, North East Frontier Railway and Ors. v. 
Dinabandhu Chakraborty, [1971) 3 SCC 883; Mis Vishnu Rice Mill, 
F Bilaspur v. Regional Food Controller, Bareilly and Ors., (1984) All. L.J. 
592 and Dwarka Prased Agarwal (D) by Lrs. And Anr. v. B.D. Agarwal 
and Ors., [2003) 6 SCC 230, relied on. 
Constitution of India, 1950: 
G 
Seventh Schedule, List I, Entry 52, List II, Entry 51-Rectified spirit-
Shortfall in production-State Government's power to impose penal duty--
Held, no penal duty could have been imposed by authorities of State 
Government on rectified spirit-The stage at which penalty was sought to 
be levied was manufacture of rectified spirit-Manufacturers had not 
H carried out any activities in relation to manufacture of potable liquor from 
362 
STATE v. INDUSTRIAL COPRN. PVT. LTD. 
363 
molasses-However, it is clarified that the opinion of the High Court to A 
the effect that in view of the decision of Supreme Court in Synthetics and 
Chemicals Ltd.*, the State has no legislative competence even in relation 
to potable liquor (which is fit for human consumption) is not correct. 
*Synthetics and Chemicals Ltd. v. State of U.P., [1990) 1 sec 109, B 
explained and relied on. 
Bihar Distillery and Anr. v. Union of India and Ors. (1997) 2 SCC 
727; relied on. 
The New Swadeshi Sugar Mills Ltd. and Anr. v. The State of Bihar C 
and Ors., (1980) PLJR 105; State of U.P. and Ors. v. Modi Distillery and 
Ors., (1995) 5 SCC 753; Siel Ltd. and Ors. v. Union of India and Ors., 
(1998) 7 SCC 26; State of U.P. andAnr. v. Synthetics and Chemicals Ltd., 
(1993) 2 SCC 308 and State of U.P. v. Synthetics and Chemicals Ltd., 
[19911 4 sec 139, referred to. 
D 
Article 226-Seventh Schedule-List II-Entry 8-Rectified spirit -
Shortfall in production-Imposition of penal duty--Challenged in writ 
petitions before High Court-State authorities contending that penalty was 
in the nature of compensation for breach of the condition of the Tender 
Notice-Held, the tender notice does not provide for imposition of any E 
penalty and in the absence of any opportunity to the distillers, the penalty 
could not be realized nor could it be adjusted against the statutory price 
for rectified spirit-Revenue being a subject-matter of legislation in terms 
of Entry 8 of List II of the Seventh Schedule to the Constitution of India, 
the recovery thereof must be made in terms of the provisions of a legislative F 
Act enacted pursuant thereto and not by reason of an executive fiat-State 
authorities have sought to exercise their statutory power and not a 
contractual obligation--Constitution of India. 
State of Orissa and Ors. v. Narain Prasad and Ors., (1996) 5 sec G 
7 40, held not applicable. 
Administrative Law: 
Statutory authorities-Levy of penalty by for shortfall in production 
of rectified spirit-Held, the statutory authorities must act within the four- H 
364 
SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R. 
A corners of a statute-They could take recourse to proceeding for levy of 
penalty and recovery thereof from the manufacturers only in the event there 
existed any agreement or statutory provision therefor-Such a power did 
not exist in the Commfrsioner of Excise or the Superintendents of Excise 
who had issued the impugned demand notices-The 

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