STATE OF MADHYA PRADESH versus M/S. K.C.T. DRINKS LTD.

Citation: [2003] 2 S.C.R. 574 · Decided: 04-03-2003 · Supreme Court of India · Bench: M.B. SHAH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
ST A TE OF MADHYA PRADESH AND ORS. 
v. 
MIS. K.C.T. DRINKS LTD. 
MARCH 4, 2003 
B 
[M.B. SHAH, ASHOK BHAN AND ARUN KUMAR, JJ.] 
Excise laws: 
C 
MP. Excise Act, 1915-Sections 18 and 27-Grant of licence in terms 
of lease to manufacture liquor-Levy of full cost of supervision and 
establishment cost-Validity of-Held, the condition empowering State 
Government to recover cost of supervisory staff posted at licensee's premises 
not illegal or ultra vires as-it constitutes price or consideration which 
Government charges to licensee for parting with its privilege and granting 
D license. 
State Government granted a licence in terms of the lease for 
manufacture of Indian Made Foreign Liquor to the respondent•company. 
Respondent-company challenged the levy of full costs of supervision and 
E establishments of excise staff posted at its factory premises. High Court 
quashed the levy of expenses incurred on supervision and e$tablishment 
cost. Hence the present appeal. 
F 
G 
H 
Allowing the appeal, the Court 
HELD: l.1. In view of Sections 18 and 27 of the M.P. Excise Act, 
1915, the State Government is entitled to accept payment of a sum in 
consideration of grant of any lease in lump sum in addition to any duty 
leviable under the Act on terms and conditions which are mentioned in 
the licence deed. Condition 8 of the licence provides that the licensee shall 
pay the full cost of excise supervisory staff posted at its premises. 
[577~D] 
1.2. Ir view of the settled legal position, the condition empowering 
~he state Government to recover the actual cost of supervisory staff posted. 
at the premises of respondent cannot be said to be in any way illegal or . 
ultra vires as it constitutes the price or consideration which tht!_ Government 
574 
STATE v. K.C.T. DRINKS LTD. [SHAH, J.] 
575 
charges to the licensee for parting with its privilege and granting licence. A 
Thus, the order of High Court is set aside. (579-E) 
Mis. Lilasons Breweries (Pvt) Ltd. v. State of Madhya Pradesh, [1992) 
3 SCC 293; Government of Andhra Pradesh v. Mis. Anabeshahi Wine and 
Distilleries Pvt. Ltd., (1988( 2 SCC 25; Shri Bileshwar Khalid Udyog Khedut 
Sahakari Mandali Ltd. v. State a/Gujarat and Ors., (1992) 2 SCC 42; Gujchem B 
Distillers India Ltd. v. State of Gujarat, (1992) 2 SCC 399, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7463 of 1993. 
From the Judgment and Order dated 4.5.1993 of the Madhya Pradesh 
High Court in M.P. No. 1456 of 1993. 
C 
Ramesh Singh for Satish K. Agnihotri, for the Appellants. 
Ex-parte. 
The Judgment of the Court was delivered by. 
D 
SHAH, J. The respondent company having a D-2 licence for 
manufacture of Indian Made Foreign Liquor from rectified spirit by blending, 
reducing and ·compounding Indian Made Foreign Liquor concentrate, 
challenged the levy of full costs of supervision and establishments of excise 
staff posted at its factory premises by filing M.P. No.1456 of 1993 in the E 
High Court of Madhya Pradesh at Jabalpur. By judgment and order dated 
4.5.1993, the High Court quashed the levy of expenses incurred on supervision 
and establishment cost on the ground that Rule 22 of M.P. Breweries Rules, 
1970 was struck down as ultra vires by this Court in case of Mis. Lilasons 
Breweries (Pvt) Ltd. v. State of Madhya Pradesh, [1992) 3 SCC 293. In p 
Mis. L"ilasons Breweries (Pvt) Ltd. 's case, this Court arrived at the conclusion 
' 
that ~ule 22 to the extent it permits raising a demand, which· in sum and 
s·ubstance is additional excise duty, without its being actually due, is ultra 
vires the Act and beyond the rule making power of the State. 
Impugned judgment and order passed by the High Court is challenged G 
by filing this appeal. 
It has been pointed out that the High Court proceeded on a misconception 
that D-2 licences were issued under Rule 22 of the M.P. Breweries Rules, 
1970. As a matter of fact, licences were issued under Rules (IV) and (V) of 
the Distillery & Warehouse Rules. It is pointed out that Brewery Rules are H 
576 
SUPREME COURT REPORTS 
[2003] 2 S.C.R. 
A not applicable to the unit of the respondent as it is not a brewery. 
B 
In support of the aforesaid contention, learned counsel for the appellants 
has drawn our attention to the Rules applicable to all distilleries and warehouse 
in Madhya Pradesh. Releva.1t Rules (IV) & (V) for the grant of licence are 
as under: 
IV. The Collector may issue, on payment of a fee of Rs. 1000 a 
licence in Form D-2 for th
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