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PETITIONER: POLYCHEM LIMITED & ANR.

       Vs.

RESPONDENT: THE STATE OF MAHARASHTRA & ORS.

DATE OF JUDGMENT:       04/08/1998

BENCH: CJI, K. VENKATASWAMI

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T K. Venkataswami, J.      The short question that arises for our consideration in this appeal  is whether the State Government is empowered to collect differential  supervision charges with retrospective effect under  Section 58-A  of the  Bombay Prohibition  Act, 1949?      The facts  leading to the filling of this appeal are as follows:-      The first  appellant is  a company registered under the provision of  the Companies  Act, 1956. The second appellant is a  share-holder and  director  of  the  first  appellant- company. The  appellants, for  the sake of convenience, will be referred  to hereinafter as the ’Company’. The company is engaged  in  the  manufacture  of  alcohol  potable  liquor, country liquor  and alcohol  based  chemicals.  As  required under Section  58 A  of the  Act read with Condition No.2 of the License  issued to  the Company in Form ’I’, the Company used to  pay in  advance the supervision charges towards the costs of  the staff  deputed for  the purpose of supervising the operation  of manufacture,  storage and issue of spirit. The Inspector  of prohibition  and Excise  by a letter dated 19th July,  1979 informed  the company  that the  wages  and dearness allowance  of Government  servants  were  increased retrospectively and  on  account  of  that  the  supervision charges payable  by the Company comes to Rs. 1,54,379.79 for the period  1970 to  1979.   However, pursuant  to the  said letter dated  19th July,  1979, no  steps were  taken by the respondents to  collect the  differential  amount  from  the Company. While so, the Company on 7th April, 1983 received a demand Notice  dated  21st  March,  1989  calling  upon  the Company  to  pay  the  differential  amount  of  supervision charges amounting  to Rs.  99,702.10 immediately  within  15 days from the date of the receipt of the said Demand Notice, failing which  legal action to recover the amount as arrears of land revenue would be taken.      Aggrieved  by   the   said   demand   of   differential supervision charges  retrospectively, the  company moved the High Court  by filing  a writ  Petition   No. 1672/83  under Article 226  of the  Constitution of  India. The  said  Writ

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Petition was  heard along  with writ Petition No. 940/82 and the main  judgment was rendered in Writ Petition No. 940/82. A Division  Bench  of  the  Bombay  High  Court  upheld  the impugned  demand   of   differential   supervision   charges retrospectively. The  Company, aggrieved  by the judgment of the Bombay  High Court  dated 12.9.90,  has  preferred  this appeal by  special leave.      Learned counsel  appearing for  the  appellants-company submitted that  the impugned  judgment of the Division Bench runs counter  to an  earlier Division  Bench judgment of the same High Court on the same point. It is stated that another Division Bench  in M/s J.E. Bilmoria & sons Vs. The State of Maharashtra & Ors. [1990 (2) Bombay C.R. 108 (Nagpur Bench)] has  quashed  similar  demand  of  differential  supervision charges  retrospectively.   Therefore,  the  judgment  under appeal, ignoring  the earlier division Bench judgment on the same point, cannot be sustained.      Learned counsel  appearing for the respondents, placing reliance on  the  reasoning  given  in  the  judgment  under appeal, supported  the conclusions  reached by  the Division Bench.      Section  58-A  of  the  Bombay  Prohibition  Act,  1949 enables the Statement Government to levy and collect what is called supervision  charges. It  is common  ground that this supervision  charges   are  collected   in  advance  at  the beginning of  every quarter.  The question for consideration is whether this collection of supervision charges in advance can be  revised as  a consequence of revision of salaries to Government  servants.  While  upholding  such  revision  and collection    of     differential    supervision     charges retrospectively, the  learned judges  in the  judgment under appeal held  that the  liability to  pay supervision charges and  the  quantification  of  the  same  are  two  different concepts and,  therefore, the liability was not imposed with retrospective effect,  but merely  rates  are  revised  with retrospective effect.  The Division  Bench for coming to the above  conclusion   placed  reliance  on  a  single  Judge’s judgment in  Writ Petition  No. 631/82. As a matter or fact, we find  that the  judgment of  the learned  Single judge in Writ Petition  No. 631/82  was  expressly  overruled  by  an earlier Division Bench of the Bombay High Court on 1.8.89 in M/s   J.E. Bilmoria’s  case (supra).  We presume  that  this Division Bench judgment was not brought to the notice of the latter Division  Bench, otherwise  they would not have taken diametrically opposite view without referring the issue to a larger Bench.  We further  notice that  the judgment  in M/s J.E. Bilmoria’s  case was  not challenged  by the Revenue as per the  information passed  on by  Mr.  Nargolkar,  learned counsel for the respondents.      In M/s  J.E. Bilmoria’s  case, the  reasonings  of  the Division Bench  to hold  that  the  demand  of  differential supervision    charges     retrospectively    was    without jurisdiction, are in the following words:-      "We have  already pointed out above      the provisions  of Section  58-A of      the  Bombay   Prohibition  Act  the      relevant rules  and the  conditions      of licence,  which  bear  upon  the      question of supervision charges. If      in pursuance  of the  provisions of      Section   58-A    of   the   Bombay      Prohibition Act,  the rules and the      conditions  of   licence,   advance      payment of  the supervision charges      had to  be made at the beginning of

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    every quarter  and without  payment      of  those   charges,  the  articles      could be  removed from  the  bonded      warehouse for  sale   evidently the      duty of  the licensee,  who  stores      articles in  the bonded  warehouse,      would be  only to  pay  the  amount      which has  been ascertained and had      to be  paid in  advance. Neither of      these provisions  clothes the State      Government or the commissioner with      the   authority   to   charge   the      supervision      charges       with      retrospective  effect.   Obviously,      when section  58-A uses  the  words      "the cost  of such  staff shall  be      paid to the State Government", that      would have reference to the cost of      the  staff  as  obtaining  for  the      period during  which the  goods are      stored in  the bonded warehouse and      not the  incidence which  the State      would have  to bear  by  reason  of      such a  remote circumstance  as the      upward revision  of the  pay-scales      of its  own employees  at &  latter      date.      ...................................      ...................................           We  must   bear  in  mind  the      nature of  excise duty as indicated      in M/s  Mc Dowell  & Co.  ’s  case,      A.I.R. 1977  S.C. 1459 (supra) that      it is  an indirect  duty which  the      manufacturer or  producer passes on      to the  ultimate consumer, that is,      ultimate incidence  will always  to      be on  the customer.  By attempting      to  pass on the incidence of upward      revision  of   pay-scales  to   the      licensees, several  years after the      removal of  the articles  from  the      bonded warehouse,  the  respondents      would make  it impossible  for  the      petitioners to  pass on the cost of      storing the  articles in the bonded      warehouse to the ultimate consumer,      and this  clearly  the  respondents      cannot be  permitted to do, because      such a  situation  had  never  been      anticipated by the petitioners, and      by the  unilateral  action  of  the      respondents,     no      additional      liability can  be  imposed  on  the      petitioners.           As  observed  in  (Income  Tax      Officer V. I.M.C. Ponnoose), A.I.R.      1970 S.C.  385, it  is  open  to  a      sovereign legislature to enact laws      which have retrospective operation.      Even  when  the  parliament  enacts      retrospective laws such laws are no      doubt prima  facie of  questionable      policy, and contrary to the general      principle that legislation by which

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    the conduct  of mankind  is  to  be      regulated  ought,  when  introduced      for the  first time,  to deal  with      future  acts,   and  ought  not  to      change  the   character   of   past      transactions carried  on  upon  the      faith of the then existing law. The      Courts will not, therefore, ascribe      retrospectivity   to    new    laws      affecting rights  unless by express      words or  necessary implication, it      appears that such was the intention      of the  legislature. Here,  it does      not appear  to us that Section 58-A      of  the   Bombay  prohibition   Act      permitted      the       Government      retrospectively   to    raise   the      quantum of  costs, nor is there any      warrant to  infer  that  there  was      delegation  to   the  rule   making      authority to  charge the  amount of      costs on  the basis  of the  events      which   could    not   have    been      anticipated at  the time  the costs      were assessed.           After describing in detail how      the   petitioners    order    their      affairs,   the   petitioners   have      stated in ground No. (vi) of para 2      of the  petition that on a rational      interpretation  of   the   relevant      conditions  and   provisions,   the      petitioners were  entitled to  know      in advance  the  costs  payable  by      them so  as to  enable them  to fix      the  price   of  goods,   and   the      respondents, having  acted  in  the      manner   and   permitted   to   the      petitioners to  sell the  goods  on      the effective  representation  that      the cost of supervision charges for      incoming quarter  was fixed for the      said   quarter,   cannot   now   be      permitted to  go back on their said      representation      and      demand      additional  amount,  more  so  with      retrospective      effect      from      5.5.1970."      On a  scrutiny of  these two  Division Bench judgments, the view  taken in  M/s J.E.  Bilmoria’s case commends to us and we are of the view that the reasonings given therein are well-founded. We  are,  therefore,  of  the  view  that  the impugned  demand   of   differential   supervision   charges retrospectively cannot  be  sustained  and  accordingly  the judgment under appeal is set aside and the Writ Petition No. 1672/83 filed  by the  company stands  allowed. The question posed at the beginning is answered in the negative.      In the  result, the  appeal is allowed accordingly with no order as to cost.