Top News Headlines 4th Feb 2022: No Excise Duty On Alcohol Unfit For Human Consumption

No Excise Duty On Alcohol Unfit For Human Consumption: SC

• The Hon’ble SC, in State Of Orissa vs. Utkal Distilleries has observed that the States have the power to levy excise duty only on alcohol which is fit for human consumption. 
• The instant appeal arose out of the decision of the Orissa HC which had set aside demand notice issued to the company to pay excise duty on weak spirit (which was a product of distillation), which was more  than 2% allowable wastage. 
• The Counsel for the respondent company argued that in the case of Synthetics and Chemicals Limited and ors. vs. State of UP and ors (1990)SCC the constitutional bench of the Apex Court has held that the State has no power to levy duty on industrial alcohol that is not fit for human consumption and the same could only be levied by the Centre.
• The Apex Court agreed with this submission and observed that it was clear that the Constitution makers distributed the term ‘alcoholic beverage’ into two categories, one that is fit for human consumption and one that is not. Alcoholic liquors which have been put in Entry 51 of List 2 (State List) authorising the State legislature to levy tax on them.
• On the other hand, alcohol that is unfit for human consumption has been put in entry 84 and that means that the Centre can levy duty on it. It was observed that what has been excluded in Entry 84 has specifically been put within the power of the State for the purpose of taxation. 
• Thus, in the aforementioned case, the Constitution bench had clearly held that the State Legislature had no authority to levy duty on alcohol which is unfit for human consumption.
• The Court also referred to section 27 of the Bihar and Orissa Excise Act, 1915 and stated that the impugned Act also made it clear that the State’s power to import, export, manufacture and transport is only in only in terms of excisable articles, which means any alcoholic liquor which is fit for human consumption or any intoxicating drug as well. Thus, it was observed that even under this Statute, the State had the power to levy tax only on alcohol fit for human consumption. 
• Thus, in light of the aforementioned observations, the appeal was set aside and the order of the HC was not interfered with. 

High Courts Cannot Interfere In The Opinion Of The Executive Unless The Decision Is Totally Arbitrary Or Unreasonable: SC 

• The Hon’ble Supreme Court (SC or Court), in State of Punjab v Mehar Bin, has set aside the impugned order of the Punjab and Haryana High Court (HC) and observed that the highest bidder in an auction has no vested right concluded in his favour unless the bid has been confirmed by the competent authority.  
• The Court also remarked that the HC, under the limited scope of judicial review under Article 226 of the Constitution, was not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision was totally arbitrary or unreasonable, and it was not open for the High Court to sit like a Court of Appeal over the decision of the competent authority. 
• The brief facts are that the Tehsildar Sales, Malerkotla conducted a public auction of a property with only three participants owing to lack of publicity and bid of the Defendant was the highest at Rs.3,90,000 which was provisionally accepted by the Tehsildar.  
• Later, the Sales Commissioner ordered a re-auction on the ground of improper publicity and inadequacy of the Defendant’s bid.  This order was upheld by the Financial Commissioner Revenue, Punjab.  
• In the absence of any irregularity or illegality being committed in the auction proceedings, the Punjab and Haryana High Court allowed the writ petition filed against these orders and directed the authority to confirm the sale.  
• Aggrieved by the order, the Appellant filed the instant appeal.  
• Quoting Rule 8 of the Scheme of Chapter III of Rules, 1976 relating to transfer of urban properties, the Court auction notice must be given wide publicity and a copy of the notice must be affixed in the locality where the property is situated and where the bid has been accepted, earnest money must be deposited for provisional acceptance which is subject to confirmation by the Sales Commissioner.  
• The Court observed that in earlier decisions of the SC it was repeatedly pointed out that the State or authority which can be held to be State within the meaning of Article 12 of the Constitution, is not bound to accept the highest tender of bid and the right of the highest bidder is always provisional to the different conditions in which the auction has been held.  
• The Court took note of the scope of judicial review in the matters of tenders/public auction and remarked that superior Courts should not interfere in the matters of tenders, unless substantial public interest was involved or the transaction was malafide.  
• The Court also observed that allegations of illegality, irrationality and procedural impropriety would be enough grounds for Courts to assume jurisdiction and remedy such ills.  
• Elaborating further, the Court also opined that the need for overwhelming public interest should be kept in mind to justify judicial intervention in contracts involving the State and its instrumentalities.  
• Allowing the appeal, the Court held that the High Court was not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision was totally arbitrary or unreasonable.  

Section 65 Of The Indian Contract Act Has To Be Limited To Those Cases Where The Party Claiming Restitution Itself Was Not In Pari Delicto: SC

• The Hon’ble Supreme Court (SC or Court), in Loop Telecom and Trading Ltd v UOI, has observed that the principle of restitution would not apply to contracts if the party claiming such restitution was voluntarily part of the agreement without any external influence.  
• The appeal arose from the judgments of the Telecom Disputes Settlement and Appellate Tribunal (DSAT or Tribunal).  
• The Appellant claimed a refund to the tune of 1455 crores paid by it towards 2G licenses which were later quashed by the SC in Centre for Public Interest Litigation v. Union of India (CPIL).  According to the contention of the Appellant, it’s claim refund was founded on the “well settled principles of civil, contractual and constitutional law”.  
• The Appellant entered into Unified Access Service Licences (UASL) with the Respondent and pursuant the judgment in case of CIPL (Supra), stating that the policy of the Union government for allocation of 2G spectrum on a “First Come First Serve” basis was illegal.  
• The TDSAT, dismissing the petition of the Appellant, held that quashing of the appellant’s licences by the Court could not be equated with the UASL agreements becoming void within the meaning of Section 65 of the Indian Contract Act 1872 (ICA).  
• The Tribunal further held that the claim for restitution under Section 65 would be governed by the principle of in pari delicto potio rest condition defendentis (in equal fault, better is the condition of the possessor) and refund could not be made until the possibility of the Appellant being in pari delicto was completely erased.  
• The Appellant contended that quashing of the licences by the Court amounted to a frustration of the licenses which were in the nature of a contract, in terms of Section 56 of ICA.  Therefore, the Appellant was entitled to a restitution of the Entry Fee paid since the licences were quashed due to the culpability of the Union government and not on account of the fault of the Appellant.  
• The Court observed that the application of Section 65 has to be limited to cases were the party claiming restitution was not in pari delicto and the claiming party's legal position in relation to the illegal act (and in comparison, to the defendant) must be understood.  
• The Court further observed that unless the party claiming restitution participated in the illegal act involuntarily or the rule of law offered them protection against the defendant, they would be held to be in pari delicto and therefore, their claim for restitution will fail  
• The Court, relying on the judgments of the Supreme Court in Inmani Appa Rao v Gollapalli Ramalingamurthi and Narayanamma v. Govindappa observed that in adjudicating a claim of restitution under Section 65 of ICA, the court must determine the illegality which caused the contract to become void and the role the party claiming restitution has played in it.  
• Rejecting the Appellant’s contention that the licences were quashed on account of the Government’s culpability, the Court observed that the appellant has been held to be in pari delicto and amongst the group of licensees who obtained benefits under the "First Come First Serve" at the cost of the public exchequer.  
• In light of the above, the appellant was entitled to claim a refund of its Entry Fee and the appeal was hence dismissed.