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PETITIONER: SHREE KRISHNA GYANODAY SUGAR LTD.M/S ARUN CHEMICAL INDUSTRIE

       Vs.

RESPONDENT: STATE OF BIHAR & OTHERS

DATE OF JUDGMENT:       14/08/1996

BENCH: MAJMUDAR S.B. (J) BENCH: MAJMUDAR S.B. (J) BHARUCHA S.P. (J)

CITATION:  JT 1996 (7)   322        1996 SCALE  (6)17

ACT:

HEADNOTE:

JUDGMENT:                             WITH                 CIVIL APPEAL NO.4764 OF 1996                       J U D G M E N T      S.B. Majmudar, J.      These civil  appeals, arising  out of  special leave to appeal granted  against a  common  judgment  rendered  by  a Division Bench  of  the  Patna  High  Court  in  three  writ petitions moved  by the  appellants, raise a common question as to  whether Rule  9 of  the Bihar  & Orissa Excise Rules, 1919 (hereinafter  referred to  as ‘the Rules’) framed under Bihar Excise  Act, 1915  (hereinafter referred  to  as  ‘the Act’) is  ultra vires  the provisions of the said Act and in the alternative  whether the  said rule  covers  appellants’ distilleries which  are  manufacturing  not  only  denatured spirit but  also potable  liquor. The  appellants’ aforesaid twin contentions  have been  repelled by  the High Court and that is how they are before us in these appeals.      Introductory facts      A few  relevant facts  leading to these proceedings may be noted  at this stage. Appellant in Civil Appeal Nos.4762- 63 of  1996 is  the licencee in respect of two distilleries, one situated  at Lauriya  and  another  at  Mirganj  in  the districts of  West Champaran  and Gopalganj  respectively in Bihar State.  It has  been granted  licences by the State of Bihar  under  the  Act.  The  appellant’s  distilleries  are manufacturing liquor  on the  basis of  licences granted  in Form No.19  for compounding  and blending foreign liquor; in Form No.19-A  for manufacture  of sacramental  wine or alter wine or  mass wine  containing not  more than  42% of  proof spirit; in  Form No.25  for  the  manufacture  of  denatured spirit; in  Form No.27 for wholesale country spirit; in Form No.28 for  manufacture of  spirit in  a distillery issued to the grantee  of the exclusive privilege of supply of country spirit under  Section 22  of the  Act; and licence issued in Form No.28-A for manufacture of spirit in distillery for use in  the   manufacture  of   chemical,  and  for  industrial,

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scientific and  other purposes.  The licences in Form Nos.27 and 28  were withdrawn  with effect from 1st April 1979. The Superintendent of Excise directed the appellant to pay a sum of Rs.1,68,128.77  towards the establishment charges said to have been  incurred over  the excise  staff  posted  at  the Lauriya distillery  from March  1973 till  July 1979  and at Mirganj distillery  for the  years 1975-76  to 1978-79.  The said demand  was raised as per impugned Rule 9 of the Rules. That led to two writ petitions moved by the appellant before the High Court.      Appellant in Civil Appeal No.4764 of 1996 challenged in its writ petition before the High Court, an order dated 27th December 1979  passed by  the Member,  Board of  Revenue, an order dated  27th September  1978 passed by the Commissioner of Excise  and the  demand made by Superintendent of Excise, Bhagalpur contained  in Memorandum  dated 5th November 1976. The said  appellant has  a distillery  in Sultanganj  in the district  of  Bhagalpur  in  Bihar  State.  It  manufactures country spirit and holds licences in Form Nos.25, 27, 28 and 28-A. However,  licences granted to it in Form Nos.27 and 28 were withdrawn with effect from 1st April 1979.      Both the  appellants contended  before the  High  Court that their  distilleries were  having composite  licenses to manufacture not  only denatured  spirit and other spirit for industrial use but were also manufacturing potable spirit or country  liquor   and  that   for  these   distilleries  the respondent-authorities  had  no  power  or  jurisdiction  to invoke Rule  9 of the Rules demanding establishment cost and cost of  officers who  were posted at these distilleries for the purpose  of supervision.  Their main contention was also to the  effect that  Rule 9 being ultra vires the provisions of the  Act, the  aforesaid demand  of the  respondents  was unauthorised.      As noted  earlier both  these contentions were rejected by the  High Court  after hearing the concerned parties. The High Court  took the  view that  Rule 9 of the Rules was not ultra vires  the provisions  of  the  Act.  So  far  as  the alterative contention was concerned it was noted by the High Court but  it appears  that no clear finding was rendered by the High  Court thereon.  However, ultimately  all the  writ petitions were  dismissed leading to the present proceedings before this Court.      Rival contentions      Learned counsel  appearing for the appellants submitted that Rule 9 of the Rules was beyond the scope of the Act and there was  no statutory provision in the said Act to sustain such a  rule. It  was alternatively  contended that  as  the appellants’ distilleries  were having licence to manufacture liquor which  was not only comprising of denatured spirit or other type  of industrial  spirit but  also potable  liquor. Rule 9  on its  express language  could not  be  pressed  in service against the appellants’ distilleries.      On the  other hand  Shri Sanyal, learned senior counsel appearing for  the respondents, submitted that impugned Rule 9 of  the Rules  was clearly sustainable under Section 38 of the Act  and it  was enacted  with a view to seeing that the denatured   spirit    manufactured   by    the   appellants’ distilleries was not illegally converted into potable liquor especially when  such an  activity itself  would invoke  the penalty provisions  of Section  49 of  the Act. Consequently with a view to subserving the public purpose and with a view to seeing  that the  society does not suffer by such illegal activities on  the part  of the  distilleries,  Rule  9  was enacted for  fructifying the  purposes of  the Act and could not be said to be de hors its provisions entitling the State

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authorities to  regulate and  supervise the working of these distilleries. On the alternative contention it was submitted by Shri  Sanyal, learned senior counsel for the respondents, that Rule  9 as  framed entitled  the Commissioner to impose costs on  the concerned  distillery which  was manufacturing denatured spirit  or any other commercial spirit which would include even  potable spirit  which was  sold in  the market and, therefore,  had commercial characteristics. Shri Sanyal also submitted  that the  words, ‘denatured  spirit  or  any other commercial  spirit’ as found in the second part of the impugned rule  could be  read as  ‘denatured spirit  and any other commercial  spirit’ and  if so read they would include even potable  spirit manufactured  by the  distilleries  for commercial purposes, namely, for selling them at a price and for earning  profit by  the said exercise. That consequently according  to  Shri  Sanyal  the  distilleries  run  by  the appellants were  squarely covered  by the sweep of Rule 9 of the  Rules  and  hence  the  High  Court  was  justified  in dismissing the writ petitions.      Points for determination      In  view   of  the   aforesaid  rival  contentions  the following points arise for our determination:      1. Whether  Rule 9  of the Rules is      ultra vires  the provisions  of the      Act?      2. In  the alternative  whether the      second  part  of  Rule  9  imposing      establishment    costs    on    the      distilleries,   on    its   express      language,    applies     to     the      distilleries run  by the appellants      for    manufacturing    not    only      denatured  spirit  and  spirit  for      industrial   use   but   also   for      manufacturing  potable  liquor  for      human consumption?      We  shall   deal  with  the  points      seriatim.      Point No.1      The Act  enacted in  1915 pertains  to import,  export, transport, manufacture, possession and sale of certain kinds of liquor  and intoxicating  drugs in  the then provinces of Bihar and  Orissa. Section  2 which  is a  dictionary clause defines  ‘Board’  as  per  clause  (2)  to  mean  ‘Board  of Revenue’. ‘Excisable  article’ as per clause (6) means, ‘(a) any alcoholic  liquor for  human  consumption;  or  (b)  any intoxicating drug.  Clause  (6a)  of  Section  2  refers  to ‘excise duty’  and ‘countervailing  duty’ which  mean,  ‘any such excise duty or countervailing duty, as the case may be, as is  mentioned in  entry 51  of List  II  in  the  Seventh Schedule  to  the  Constitution’.  Section  2(12a)  defines, ‘intoxicant’ to mean, ‘(i) any liquor, or (ii) any substance from which  liquor may be distilled and which is declared by the State Government by notification in the official Gazette to be  an intoxicant  for the  purpose of this Act, or (iii) intoxicating drug,  or (iv) medicinal preparation as defined under the  Medicinal and Toilet Preparations (Excise Duties) Act, 1955’. The term ‘liquor’ is defined by Section 2(14) to include all  liquids consisting  of or  containing  alcohol, such as  spirits of  wine,  spirit,  wine,  fermented  tari, pachwai and  beer, and  also unfermented  tari, and also any other  substance   which  the   State  Government   may,  by notification, declare  to be liquor for the purposes of this Act. The  term ‘spirit’ is defined by clause (19) of Section 2 to  mean,  ‘any  liquor  containing  alcohol  obtained  by

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distillation, whether  it is denatured or not’. The term ‘to denature’ is  defined by  clause 5(b) to mean ‘to mix spirit with one  or more  denaturants in  such  manner  as  may  be prescribed by  rule made  in this behalf under clause (3) of section 90,  and "denatured  spirit" means spirit so mixed’. Section 13  deals with  ‘licence required  for manufacturing intoxicants’.  Section   15  deals  with  ‘establishment  of distilleries, breweries  or warehouses’.  It lays  down that the Excise  Commissioner may  subject  to  any  restrictions imposed by the State Government, establish, or authorise the establishment of, distilleries or breweries, in which liquor may be  manufactured under  a license  granted under section 13.  Thus  under  a  licence  granted  under  Section  13  a distillery can  manufacture liquor  which would  include not only potable  liquor but even denatured spirit or spirit for industrial use  which is  not potable. Section 22 deals with ‘grant of  exclusive privilege  of manufacture  and sale  of country liquor  or intoxicating drugs or denatured spirit or any other  intoxicants’. It  is the  case of  the appellants that they  have not  got any  such exclusive privilege under the aforesaid  Section to manufacture country made liquor or intoxicating drugs  or denatured  spirit. Section  27  deals with ‘power  to impose duty on import, export, transport and manufacture of any excisable article’. It is not the case of either side that Rule 9 seeks to impose any excise duty or a countervailing duty.  The Section  which is relevant for our purpose is Section 38 which reads as under:      "38. Fees  for  terms,  conditions,      and  form   of,  and  duration  of,      licences, permits and passes. - (1)      Every  licence,   permit   o   pass      granted under this Act-      (a) shall be granted -      (i) on  payment of  such  fees  (if      any), and      (ii) subject  to such  restrictions      and on such conditions, and      (b)  shall  be  in  such  form  and      contain such  particulars,  as  the      Board may direct.      (2) Every  licence, permit  or pass      under this Act shall be granted for      such period  (if  any)  as  may  be      prescribed  by  rule  made  by  the      State Government  under section 89,      clause (e)."      A conjoint reading of Section 38 sub-Section (1)(a)(ii) and Sections  15 and  13 of the Act leaves no room for doubt that  licences   issued  to   the  appellants’  distilleries governed by the Act can be made subject to such restrictions and conditions  as the  Board of Revenue may direct. Section 90  of  the  Act  empowers  the  Board  to  make  rules  for regulating  the   manufacture,  supply  or  storage  of  any intoxicant and  in particular,  and without prejudice to the generality of the provision, the Board is also authorised to make rules  for regulating  the  establishment,  inspection, supervision, management  and control  of any  place for  the manufacture, supply  or storage  of any  intoxicant, and the provision  and   maintenance  of  fittings,  implements  and apparatus therein.  As per sub-Section (9) of Section 90 the Board can  also prescribe  restrictions under  which or  the conditions on  which any  licence, permit  or  pass  may  be granted, and  in particular,  and without  prejudice to  the generality  of  this  provision,  may  make  rules  for  (i) prohibiting the admixture with any intoxicant or any article

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deemed to  be noxious  or objectionable,  (ii) regulating or prohibiting  the   reduction  of   liquor  by   a   licensed manufacturer or  licensed vendor  from a  higher to  a lower strength, (iii)  prescribing the  nature and  regulating the arrangement of  the premises  in which any intoxicant may be sold, and  prescribing the  notices to  be exposed  at  such premises. It  is in  exercise of  the aforesaid  rule making powers available  to the  Board of  Revenue under Section 90 that the  impugned Rule,  amongst other  rules, came  to  be enacted. It  is pertinent  to note  that  Bihar  and  Orissa Excise Rules  of 1919  as initially  framed contained Rule 9 which read as under :      "The  Commissioner   shall  appoint      such officers  and establishment as      he thinks  fit to  the charge  of a      distillery."      It was  only on  23rd August  1930 that  the concept of establishment cost to be borne by the distilleries concerned got engrafted  in the  said Rule  by way of second part. The ruled consisting of both these parts is as under :      "9. The  Commissioner shall appoint      such officers  and establishment as      he thinks  fit to  the charge  of a      distillery.      In the case of a distiller licensed      solely  for   the  purpose  of  the      manufacture of  denatured spirit or      any other  commercial  spirit,  the      distiller shall bear the whole cost      including   leave    and    pension      contributions and  cost of  uniform      of   such    excise    staff    and      establishment as  may be considered      necessary     by     the     Excise      Commissioner       for       proper      supervision."      The appellants contend that said impugned Rule 9 cannot trace its  origin to  any of the statutory provisions of the Act. It  is difficult  to agree  with this  contention.  The aforesaid statutory  provisions clearly  indicate  that  the authorities functioning  under the  Act  can  supervise  and regulate the working of the distilleries which are licensees under  the  Act.  Power  to  regulate  and  supervise  these distilleries as  engrafted in  the first  part of Rule 9 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  38(1)(a)(ii) which entitle the Board  to impose suitable restrictions and conditions on the licencees  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 sub-section  (1)(a)(ii) read  with Section 90 sub-Section (1)(a) and  sub-Section 9(i) and (ii) represents a well-knit statutory scheme  authorising the  Board to promulgate rules for  laying   down  restrictions   and  conditions   on  the licensees, 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 of the learned counsel  for the  appellants that  Rule 9  is  ultra vires the provisions of 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

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such spirit  may be  used for human consumption whether as a beverage or  internally as a medicine would be committing an offence which  is punishable under Section 49 of the Act. It is, therefore,  permissible for the excise authorities under the Act  to supervise  the working  of such  distilleries so that they  may not commit such offence sand to oversee their manufacturing activities.  It is  axiomatic  to  state  that prevention is  better than  cure.  If  denatured  spirit  is illegally altered  and made fit for human consumption, it is likely to have devastating effect on the health of consumers and may  even result in fatal consequences or loss of vision and other pernicious physical handicaps. In order to prevent such social  calamities, if  supervision is  provided at the cost of distilleries, it cannot be said that such conditions are not  germane to  the requirements  of the  Act or do not flow from  the statutory scheme envisaged by the Act. If for this laudable  purpose an  establishment is  put up  at  the doorsteps of the distilleries themselves as per the impugned rule and  if cost  of maintenance  of such  establishment is foisted on  the licensee distilleries it cannot be said that such a  rule is  de hors  the provisions  of the Act. On the contrary  such   a  provision   squarely  falls  within  the regulatory powers of the Board for framing rules with a view to seeing  that the provisions of the Act are not stifled or tinkered with by such licencee distilleries.      Reliance placed  by learned  counsel for the appellants on a  Constitution Bench  judgment of  this Court  in Indian Mica Micanite  Industries v.  The State  of Bihar and others 1971 (2) SCC 236 also cannot be of any avail as in that case this Court  was concerned  with  the  question  whether  the appellant who  was a  consumer of  denatured spirit could be subject to  a levy by way of fee under Rule 111 of the Rules framed under  Section 90  of the Act. In paragraph 17 of the Report the  Constitution Bench  considered the nature of the service rendered by the Government to the appellant, namely, consumer of  denatured spirit.  It was  observed in the said paragraph that  so far  as  the  manufacturing  process  was concerned, the  appellant or  other  similar  licensees  had nothing to  do with  it. They  were only  the purchasers  of manufactured denatured spirit. Hence the cost of supervising the manufacturing  process or any assistance rendered to the manufacturers could not be recovered from the consumers like the appellant.  Further under  Rule 9  of the Board’s rules, the actual  cost of supervision of the manufacturing process by the  Excise Department  was required  to be  borne by the manufacturer. There  could not  be a  double  levy  in  that regard. In  this connection,  it was observed that the State was not  rendering any  service to the consumer of denatured spirit when  it was maintaining its own staff for regulating the  manufacturing  process  of  such  spirit.  We  fail  to appreciate how this decision can be of any assistance to the learned counsel  for the  appellants for  the simple  reason that in this very judgment Rule 9 of the Board’s Rules which is impugned  before us  was referred  to as a rule which was operative qua  manufacturers of spirit. It was only Rule 111 which was  on the  anvil of  scrutiny and in connection with the said  Rule it  was held  that because  the State was not rendering any  special service  to the consumer of denatured spirit the  impugned levy  under Rule 111 was not justified. Such is not the case before us. It is also pertinent to note that even  though constitutional  validity of Rule 9 was not challenged in  the aforesaid  case it was noted by the Court that the said Rule justifiably sought to recover actual cost of supervision  of the  manufacturing process  by the Excise Department from the manufacturer distillery. Learned counsel

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for  the   appellants  then  placed  for  our  consideration decision of  another Constitution  Bench of  this  Court  in Synthetics and  Chemicals Ltd.  and others  v. State of U.P. and others  (1990) 1  SCC 109.  In that  case this Court was concerned with  the constitutional  validity of  the levy by way  of   vend  fee   imposed  by  the  respondent-State  on industrial alcohol.  It was held that such imposition by the State was  beyond the  legislative powers  conferred on  the States concerned  by any of the entries in List II or III of the Constitution  of  India.  Reliance  was  placed  on  the observations in paragraph 86 of the Report wherein by way of sub-para (d) it was observed.      "However,   in    case   State   is      rendering any  service, as distinct      from its  claim of  so-called grant      of privilege,  it may  charge  fees      based on  quid pro quo. See in this      connection,  the   observations  of      Indian Mica case.      Even these  observations cannot be of any assistance to the appellants for supporting their contention that impugned Rule 9 is de hors the provisions of the Act.      On the other had learned senior counsel Shri Sanyal for the respondents  heavily leaned  on two  decisions  of  this Court in  M/s Gujchem  Distilleries India  Ltd. v.  State of Gujarat and  another (1992)  2 SCC  399 and  Shri  Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat and another (1992) 2 SCC 42 wherein this Court has taken the view that  levy of  supervisory charges from manufactures of industrial alcohol  by a  manufacturer in its own distillery governed by  the provisions  of Bombay Prohibition Act, 1949 was perfectly  valid. Learned  counsel for  the  appellants, however. contended  that the  aforesaid two  decisions  were based on  the express language of Section 58-A in the Bombay Prohibition Act,  1949 empowering  the State  Government  by general or  special order  to direct  that the  manufacture, import, export,  transport, storage,  sale,  purchase,  use, collection  or  cultivation  of  any  intoxicant,  denatured spirituous preparations,  hemp, Mhowra  flowers, or molasses shall be  under the  supervision  of  such  Prohibition  and Excise or police Staff as it may deem proper to appoint, and that the  cost of  such staff  shall be  paid to  the  State Government by person manufacturing, importing, transporting, storing,   selling,   purchasing,   using,   collecting   or cultivating    the    intoxicant,    denatured    spirituous preparation, hemp,  Mhowra  flowers  or  molasses.  To  that extent learned counsel for the appellants is right. However, in the  present Act  with which we are concerned even though there is  no such express provision like Section 58-A of the Bombay Prohibition  Act, 1949  there is sufficient statutory provision  in   that  behalf   in  the   shape  of   Section 38(1)(a)(ii) road  with the  relevant clauses  of Section 90 noted by  us earlier. It cannot, therefore, be said that the impugned Rule  9 is  ultra vires  the provisions of the Act. The High  Court was,  therefore, justified  in rejecting the said challenge.  Point No.1  is accordingly  answered int eh negative.      Point No.2      This takes  us to  the consideration  of Point No.2. So far as  the contention  concerning  this  point  goes,  even though it  was noted  by the  High Court  in para  39 of the impugned common  judgment that  the principal question which arises for  consideration is  as to whether the Commissioner has  the   power  to   appoint  an  officer  and  create  an establishment to  the charge  of distilleries only in a case

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where a  licence has  been granted solely for the purpose of manufacture of  denatured spirit  or  any  other  commercial spirit  and   even  though   it  observed   that  the  words ‘commercial spirits’  have not  been defined  under the said Act and  the said  words have,  therefore, to be given their ordinary meaning,  the High Court has not dilated further on this aspect.  Nor has  it pronounced  upon  the  alternative contention whether  said Rule  9 on its express language can apply to the distilleries run by the appellants.      In this  connection learned  counsel for the appellants vehemently contended  that it  is not in dispute between the parties  that  the  appellants  are  having  licences  under Section 15 read with Section 13 not only to run distilleries for  manufacturing  denatured  spirit  or  other  industrial alcohol  but  also  have  licences  to  manufacture  potable liquor, including  country made  liquor. In  this connection reliance was  placed on  averments made in paragraph 2(b) of the Special  Leave Petition  which stated  that the  Hon’ble High Court  on an incorrect premise that "commercial spirit" included all  kinds of  spirits including  the one  fit  for human  consumption   (potable  spirit)  concluded  that  the petitioner’s  distillery,   even  though   it   manufactured denatured and/or  commercial spirit  only to  the extent  of about 10%  of its  total production,  was liable  to pay the establishment charges.  So far as this averment is concerned in the  counter affidavit  on behalf  of respondent no.1 has been stated in paragraph 4 as under :      "4. In reply to para 2(a) and (b) I      say that  it  is  stated  that  the      Distillery petitioner  is bound  to      pay  the   costs  of  establishment      including  costs   of   leave   and      pension, contribution  and  uniform      of  staff   posted  by  the  Excise      Commissioner       for       proper      supervision, according  to  Rule  9      notified  by  Board’s  Notification      No.23-137-2 dated 29th April, 1919.      he petitioner Distillery is holding      excise licence  in Form 25 and 28A.      The Licence  Form 25 is licence for      manufacture of Denatured Spirit and      licence Form  28A is  a License for      manufacture of  spirit for  use  in      chemicals,  industrial,  scientific      and other purposes. Section 2(5) of      Bihar Excise  Act, 1915  (Act II of      1915)  defines   "to  denature"  as      meaning to  mix spirit  with one or      more denaturants  in such  a manner      as may  be prescribed  by Rule made      in this  behalf under clause (3) of      Section  90  and  denatured  spirit      means spirit so mixed.      The  commercial   spirit   is   not      defined in  Excise Act.  So it will      have a  liberal meaning i.e. spirit      for  use  of  commercial  purposes.      Petitioner licencee has got license      under Excise Act for manufacture of      spirit  for   commercial   purposes      including denatured  spirit and is,      therefore,  undoubtedly  liable  to      pay the  establishment costs as per      Rule 9  framed by Board in exercise

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    of powers  conferred under  Section      90 of the Act."      It, therefore,  becomes clear  that the  averment  that appellants’  distilleries   manufacture,   amongst   others, potable spirit  to the extent of 90% of its total production as compared  to 10% of its production of denatured spirit or commercial spirit  is not  controverted at  all.  Even  that apart in  paragraph 2  of the  judgment of the High Court it has been stated as a fact that the appellant in Civil Appeal Nos. 4763-63  of 1996 was having licence for compounding and blending  foreign   liquor  amongst   others.  Similarly  in paragraph 9 of the judgment in appeal it has been noted that so far  as the  appellant in Civil Appeal No.4764 of 1996 is concerned its  distillery at  Sultanganj was  having licence for manufacture  of country  spirit in  Forms 25, 27, 28 and 28-A. We must, therefore, proceed on the basis of undisputed factual position on record of these cases that the concerned distilleries of  the appellants  were  having  licences  for manufacturing not  only denatured  spirit  or  spirit  which could be  used for  industrial purposes but were also having licences for manufacturing potable liquor. In the background o this well established factual position we have to consider the alternative  contention canvassed by learned counsel for the appellants.  We have  already extracted  Rule 9 earlier. The first  part of  the Rule prior to its amendment by which second part  got added to it, authorised the Commissioner to appoint such  officers and establishment as he thinks fit to the charge  of a  distillery. The  words ‘to the charge of a distillery’ were  interpreted by the High Court to mean, ‘at cost of  the distiller’.  This interpretation  was  strongly relied upon  by learned  senior counsel  Shri Sanyal for the respondents. In  our view  the said interpretation cannot be countenanced.  The   first  part   of  Rule  9  contemplates appointment of  officers and establishment as thought fit by the Commissioner  with  a  view  to  taking  charge  of  the distillery for  supervisory purposes.  The context  in which the  said  phraseology  was  employed  by  the  rule  making authority leaves  no room  for doubt  that the words ‘to the charge of  a distillery’ were meant to empower such officers and establishment  contemplated by Rule 9 to be in charge or control of  distillery for  the purposes of supervision. The term ‘charge’  can obviously  not mean  the  ‘cost’  of  the distillery as  the aspect  of cost of such establishment and officers was  taken care  of by the rule making authority by enacting the  second part  of the Rule. If the term ‘charge’ included the  cost of  such officers and establishment there would have been no need to enact the second part of the Rule later  on   for  imposing   such  costs   on  the  concerned distilleries. Even  that apart  if we  see the first part of Rule  9  which  employs  the  words  ‘to  the  charge  of  a distillery’ in  the context  of succeeding  rules especially Rule 10  which deals  with the  duty  of  the  distiller  to provide suitable  quarters  for  the  officer-in-charge  and other establishment,  Rule 11  which enjoins the officers in charge of  the distillery  in case  of fire  or accident  to immediately attend  to the  same, Rule 15 which requires the distiller to  keep accounts which should be made open at all times for  inspection by  the Excise  Officer in  charge and also Rules 16 and 17 which deal with the authority and power of Excise  Officer in charge, no doubt is left that the rule making authority  contemplated the  concerned  officers  and establishment to  be put in charge of the distillery when it employed the  words ‘to  the charge  of a distillery’ in the first part of the Rule which got enacted simultaneously with the succeeding  rules, that  is, Rule 10 onwards as noted by

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us above.  An officer  cannot take  charge of the distillery unless he is put in charge of such distillery in exercise of powers of the Commissioner under Rule 9, first part.      Now we  come to  the consideration of the moot question whether the  second  part  of  Rule  9  which  is  the  main provision which  is impugned  in the present proceedings can apply to distilleries run by the appellants which are having multiple licences  to manufacture  not only denatured spirit or other  industrial spirits  but also  potable  spirits  or liquor fit  for human  consumption. The  answer to this moot question has  to be  found from the express wording employed by the  rule making authority in the second part of the said rule. Before the said part can be pressed in service against any distillery  the following  conditions must  be shown  to have existed in connection with such a distillery : 1.   The concerned  distillery must  have  licence  for  the purpose of  manufacturing  denatured  spirit  or  any  other commercial spirit. 2.   Such a licence must be solely for the aforesaid purpose and for no other purpose.      If those  two conditions  are satisfied  then only  the whole  cost  of  such  officers  and  establishment  can  by required to  be borne by such distillery. It is obvious that the distilleries  run by  the appellants  which are  made to defray the  cost of  officers and establishment under Rule 9 are not  distilleries which are manufacturing only denatured spirit or  any other  commercial spirit  nor are they having licences solely for the purpose. Shri Sanyal, learned senior counsel for  the respondents  submitted that  the words ‘any other commercial  spirits’ would include even potable spirit or  liquor   fit  for  human  consumption  as  it  has  also commercial value  and can  be sold in the market. He further submitted that  the word  ‘or’ found  in between  the  terms ‘denatured spirit’  and ‘any other commercial spirit’ may be read as  ‘and’ and  when so  read it can be held that second part of  Rule 9  can apply  to even those distilleries which have licences  for manufacturing  denatured spirit  and also other commercial spirits including potable liquor. It is not possible to agree with this contention for the simple reason that such  a  contention  would  ignore  the  term  ‘solely’ employed by  the rule  making authority in its wisdom in the second part  of Rule 9. It has to be held that before it can be applied  to any  distillery it  must be  shown that  such distillery is  licensed  solely  or  wholly  to  manufacture either denatured  spirit or  any other commercial spirit. If the word  ‘or’ is  read as ‘or’ then it must be shown by the respondent that  the  appellants’  distilleries  are  having licences  for   either  solely   and  wholly   manufacturing denatured spirit  or are  having  licences  for  solely  and wholly manufacturing  any other  commercial spirit which may be even  assumed to  include potable liquor. If a distillery has the  licence to  manufacture denatured spirit and also a licence to  manufacture  any  other  commercial  spirit,  it cannot be  said to  be  having  a  licence  solely  for  the manufacture of  either of these two types of spirits. On the express language  of the  rule, distilleries having multiple licences get  excluded from  its sweep.  On the facts of the present case, we have seen that the appellant’s distilleries are having  multiple licences.  None of  the distilleries of the appellants  are having  licence  solely  to  manufacture denatured spirit  or only to manufacture potable liquor even assuming that it is cover by the term ‘commercial spirit’.      Having realised  this difficulty  Shri Sanyal,  learned senior counsel  for respondents submitted that the word ‘or’ may be  interpreted as ‘and’. Even if the said submission is

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accepted it  would not  advance the  case of the respondents for the  simple reason  that the words ‘denatured spirit and any other  commercial spirit’  if read  as suggested by Shri Sanyal will  result  in  the  succeeding  words  ‘any  other commercial spirit’  getting colour from the proceeding words ‘denatured spirit’  meaning  thereby  any  other  commercial spirit contemplated by the said phrase must fall in the same category or  class as  denatured spirit  which precedes  the class of  such residuary commercial spirit as the succeeding words refer to ‘any other commercial spirit’ meaning thereby commercial   spirits    other   than    denatured   spirits. Consequently if  the word  ‘or’ is  read as  ‘and’ any other commercial  spirit  would  fall  in  the  same  category  as denatured spirit meaning thereby those spirits which are not fit for  human consumption.  They would  not  cover  potable spirits even  assuming that  they are  commercial spirits as contended  by  Shri  Sanyal.  However,  in  our  view  other commercial spirits  as contemplated  by the  Rule are  those spirits which  are unfit  for human  consumption and they do not cover  potable liquor  which cannot  fall in  line  with denatured spirit.  In the  context of  denatured  spirit  as mentioned in  the Rule  the succeeding  words, ‘or any other commercial spirit’ must mean those spirits which fall in the category  of   spirits  unfit  for  human  consumption  like denatured spirits. In other words the term ‘other commercial spirits’ would  take in  its sweep  only those spirits which are used  for industrial purposes or any other purpose other than for  human consumption.  Consequently reading  the word ‘or’ as  ‘or’ or  even reading  it as  ‘and’ the appellants’ distilleries  which   are  having   multiple   licences   to manufacture not  only denatured  spirit or  other industrial spirit but also potable liquor would get out of the sweep of the second  part of  Rule 9. On the express language of Rule 9, second  part, the alternative contention canvassed by the learned counsel  for appellants  has got  to be accepted. It must, therefore,  be held  that second  part of  Rule 9 will apply to  only those  distilleries which are licensed solely and wholly for the purpose of manufacturing either denatured spirit or  any  other  commercial  spirit  unfit  for  human consumption but  would not  include those distilleries which are licensed  for manufacturing  along with denatured spirit or other  industrial spirits  unfit for  human  consumption, also potable  liquor which  is fit for human consumption. As the appellants’  distilleries are  not having  such sole and only licences  for manufacturing  denatured spirit  or other commercial spirit  unfit for  human consumption but are also having  composite   and  multiple  licences  to  manufacture potable liquor  which obviously  yields large revenue to the State by way of excise duties, they are outside the sweep of second  part   of  Rule  9.  It  is  obvious  that  to  such distilleries the  first part  of the  Rule may apply wherein the  State   will  have   to  bear  the  cost  of  providing supervisors and establishments for that purpose but the cost of  such   establishment   cannot   be   foisted   on   such distilleries. Point  No.2 is,  therefore,  answered  in  the negative.      In the  result the  appeals partly  succeed. The common judgment under appeal is set aside. The writ petitions filed by the  appellants in  the High  Court will stand allowed in part by  holding that  even though Rule 9 is intra vires the provisions of  the Act  the second  part of Rule 9 regarding foisting  of   establishments  costs   on  the   appellants’ distilleries does  not cover these distilleries. However, it is clarified that first part of Rule 9 can be applied to the appellants’ distilleries  but  at  the  cost  of  the  State

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exchequer only.  By an  interim order  dated 21st March 1996 the interim  stay of  the  impugned  demands  was  continued subject to  the condition  that the appellants shall pay 50% of the  arrears of  the demand  within eight  weeks and will continue to  pay 50%  of the  future  demand.  .....  ...... ......  Even  if  the  appellants  succeeded  they  will  be entitled to  refund of the amount paid by them with interest at the  rate of  12%. In  view of this interim order, as the appellants have  succeeded in  these appeals as aforesaid in getting the  impugned demands  quashed the  respondents  are directed to  refund the  amounts collected  by them from the appellants pursuant  to the  impugned demands  pending these appeals with  12% interest  from the date of receipt of such amounts till repayment. The amounts shall be refunded within eight weeks  from the  receipt of  the copy of this order by the respondents. The appeals accordingly are partly allowed. In the facts and circumstances of the cases there will be no order as to costs all throughout. Jfdl;fkld; lkfjdlkjfdlfjdlfjdlfjd sjdlsjdls djslkdjslkdj kdjskldsl