Critical Analysis of Special Corona Fee Imposed by Govt. of NCT Delhi On Liquor
Amid the Pandemic, Government of NCT Delhi & other states are charging Special Fee under the heading of ‘Corona Fee’ on the sale of liquor. It is pertinent to note that Revenue Department, Government of NCT Delhi in exercise of the power conferred under Section 4, Section 11 (1) and Section 77 read with Section 81(1) and/or Section 81(2)(f)/(g), that Rule 154 (4) of the Rules Of the Delhi Excise Act, 2009, vide notification dated 04.05.2020 has imposed 70 percent “Special Corona Fee” on MRP for selling liquor.[i]
A batch of PIL have been filed in the High Court Of Delhi against the aforesaid notification dated 04.05.2020 levying levying 70% special corona fees on various constitutional & provisional grounds mentioned under the Delhi Excise Act, 2009.
Section 26 of the Delhi Excise Act, 2009 says “Excise revenue shall be levied and recovered under the following heads, namely:— (a) duty; (b) licence fee; (c) label registration fee; (d) import or export fee”. Further, section 2 of the act empowers the govt. to charged vary duty.[ii]
Section 28(1) says where, in respect of any intoxicant, the Government is satisfied that the duty leviable thereon under section 27 of this Act should be increased or decreased and that circumstances exist which render it necessary to take immediate action, the Government may, by notification in the Official Gazette, direct an amendment of the Schedule to be made so as to substitute for the rate of duty specified in the Schedule in respect of such intoxicant.
(2) Every notification under sub-section (1) shall be laid before the Legislative Assembly, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Government shall seek the approval of the Legislative Assembly to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the Legislative Assembly. If the Legislative Assembly makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.
The term duty is defined in section 2(23) of the said act which specifies “duty” means the excise duty or the countervailing duty as mentioned in Entry 51 of List II of Seventh Schedule of the Constitution, or, as the case may be, special duty.
The Excerpt of Entry 51 of List II of Seventh Schedule of the Constitution is reproduced hereunder:
Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:— (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.
The term “excise revenue” means revenue derived or derivable from any payment, duty, fee, tax, confiscation or fine, imposed or ordered under the provisions of this Act, or of any other law for the time being in force relating to intoxicants but does not include fine imposed by a court of law;
Further, Section 81 speaks about power of Government to make rules. The relevant extracts of the provision are reproduced hereunder.
81. Power of Government to make rules (1) The Government may by notification make rules not inconsistent with the provisions of this Act to carry out the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:— (a) prescribing the powers and duties of excise officers and delegation of power; (b) prescribing the time and mariner of presenting appeals and the procedure for prosecuting and dealing with review, appeal and revision; (c) regulating import, export, transport, manufacture, collection, possession, supply or storage of any intoxicant, mahua flower, black jaggery and molasses; (d) regulating the sale and possession of toddy, neera or taxi and tapping of trees for drawing toddy or tart (e) declaring the process of denaturation of spirit; (f) regulating the wholesale or retail sale of intoxicants; (g) regulating the time, place, rate and manner of payment of duty or fee and the taking of security for its due payment; (h) prescribing the authority by which, the form and the manner in which, and the terms and conditions, subject to which any licence, permit or pass shall be granted; (i) providing for the deitruction or other disposal of any liquor deemed to be unfit for use; (j) regulating disposal of confiscated articles; (k) providing for the grant of reward to excise officers and informers; (1) regulating the grant of expenses to witnesses; (m) regulating the power of excise officer to summon witnesses; (n) curbing activities of boot-leggers who distill, manufacture, store, transport, import, export, sell or distribute any intoxicant in contravention of any provision of this Act or the rules made thereunder; (o) any other matter which is required to be, or may be prescribed under this Act.
Section 26 of the Delhi Excise Act empowers state to recover only 4 types of revenues i.e. duty; licence fee; label registration fee & import or export fee. Therefore, there is no provision in the act which permits the state to recover any other revenue. Further, Section 27 of the Act imposes certain restriction on the collection or recovery of revenues. Section 27(1) says (1) “There shall be levied and collected duty on all intoxicants which are produced, manufactured, transported or imported into Delhi at such rates as may be prescribed, not exceeding the rates set forth in the Schedule”. Furthermore, section 27(2) says “There shall be levied and collected fees for terms, conditions and form of, and duration of, licence, permit and pass”.
Thus, by bare reading of aforesaid provisions one can understand that the said act does not recognizes any “Special Fee” whatsoever. The aforesaid only species about “Special Duty” which is mentioned under section 2(23) of the act.
It is pertinent to note that State has imposed the “Special Fee” by invoking provisions of section of section 81 of the Delhi Excise Act. The relevant extracts of the section is reproduced hereunder.:
81. Power of Government to make rules (1) The Government may by notification make rules not inconsistent with the provisions of this Act to carry out the purposes of this Act.
(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—
(f) regulating the wholesale or retail sale of intoxicants;
(g) regulating the time, place, rate and manner of payment of duty or fee and the taking of security for its due payment;
(h) prescribing the authority by which, the form and the manner in which, and the terms and conditions, subject to which any licence, permit or pass shall be granted;
Thus, the act clearly says that Government can only make rules in consistent with the provisions of the act. Further, Section 81(2)(g) empowers the State to regulate the rate & manner of payment of duty or fee inconsistent with the provisions of the act. As said above, the act does not recognizes any “Special Fee” which can be imposable in any circumstances. Therefore, imposing a special levy without seeking necessary amendment in the act is bad in law.
In Re: Cape Brandy Syndicate v. I.R.C.[iii] The rule of construction of a taxing statute has been pithily stated by Rowlatt J.
“In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is ‘no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used”.
That placing reliance upon aforesaid principle, the Hon’ble Supreme Court in case titled Commissioner Of Income Tax Vs. Ajax Products Ltd. [iv] has held that:
“the subject is not to be taxed unless the charging provision clearly imposes the obligation. Equally important the rule of construction is that if the words of a statute are precise and unambiguous, they must be accepted as declaring the express intentions of the legislature”
In light of above, it can be said that the state cannot imposed any new excise duty without seeking amendment in the act or passing appropriate legislation in regard to the same. Secondly, Entry 66 in the State List mentioned under seventh schedule of the Indian constitution empowers the state to levy fees in respect of the matters falls under the State List. Further, Entry 51 speaks about excise duty on liquor. However, in order to levy any fees in relation to Entry 51, a state needs to pass proper legislation regarding the same in conformity with the provisions mentioned in the constitution.
To ascertain the fact that whether the levy imposed by the state is a “Fee or a Tax”, one needs to first know the basic difference between these two. Tax is a common burden and the only returns the tax-payers gets is the participation in the common state. The main purposes to impose a tax is to generate public revenue, whereas, fee is a payment for services rendered, benefit provided or privilege concern. Although the traditional concept that the element of quid pro is always a sine qua non for a fee has been changed, however, there must be some distinct relationship between the fee & privilege conferred. [v]
The Hon’ble Supreme Court in case titled Mahant Sri Jagnath Ramanuj Das & Anr. vs. State of Orissa[vi] has held that:
Our Constitution, however, has made a distinction between a tax and a fee for legislative purposes and while there are various entries in the three lists with regard to various forms of taxation, there is an entry at the end of each one of these lists as regards fees which could be levied in respect of every one of the matters that are included therein. A tax is undoubtedly in the nature of a complusory exaction of money by a public authority for public purposes, the payment of which is enforced by law. But the essential thing in a tax is that the imposition is made for public purposes to meet the general expenses of the State without reference to any special benefit to be conferred upon the payers of the tax. The taxes collected are all merged in the general revenue of the State to be applied for general public purposes. Thus, tax is a common burden and the only return which the taxpayer gets is the participation in the common benefits of the State. Fees, on the other hand, are payments primarily in the public interest but for some special service rendered or some special work done for the benefit of those from whom payments are demanded. Thus in fees there is always an element of quid pro quo which is absent in a tax. Two elements are thus essential in order that a payment may be regarded as a fee. It the first place,, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State.to be spent for general public purposes.
In Gopi Prasad Vs State of Punjab[vii] , the Hon’ble High Court of Punjab & Haryana while placing reliance upon in re: ‘Flint v. Stone Tracy Co.’ (1911) 220 US 107 (C) has observed that:
5. In order to determine whether licence legislation is a regulatory or a revenue measure, it is necessary to examine the operation, practical results and incidents and the substance and natural and legal effects of the language employed in the statute by which the charge has been imposed. Although the name by which the Legislature chooses to designate a particular charge is not conclusive, it is an important factor in determining whether the particular imposition is a tax or a. licence fee.
Further, the Hon’ble High Court in Gopi Prasad (Supra) while placing reliance upon the judgment ‘Tarver v. Albany’, 127 Se A 58 (E) has observed that:
It is necessary also to ascertain the power, whether regulatory or taxing, under which the amount is demanded and the purpose for which the demand is made. If the amount is exacted solely for revenue purposes and the payment thereof confers a right to carry on the business or occupation without the performance of any further conditions it is a tax
It is pertinent to mention that Delhi Excise Act, 2009 is enacted to consolidate, amend and update the Excise Laws relating to manufacture, import, export, transport, possession, purchase, consumption, sale, etc., of liquor and other intoxicants, in the National Capital Territory of Delhi. Therefore, it is heavy burden upon the state to justify the aforesaid levy i.e. “Special Corona Fee” has been imposed to regulate the business or supervise the sale ,purchase or consumption of the liquor amid the pandemic. Further, state has to justify the aforesaid is just & appropriate in order to attain its object. Furthermore, there is heavy burden upon the state to justify aforesaid levy is a “Fee” but not a “Tax”. Also, the said imposition seems to be colorable practice in order to generate revenue under the garb of “Fee”.
It is pertinent to note that the nature & quantum of levy imposed by the state certainly clarifies that the aforesaid levy is a “Tax” in order to generate revenue to revive the economy amid the pandemic. Whether a certain levy is a ‘fee’ or ‘tax’ also depends upon the facts & circumstances of each case. However, the circumstances amid the pandemic suggest main purpose behind opening of liquor sells or shops is to generate revenue. Further, the quantum of aforesaid levy imposed by the state is too heavy and the same is more or less suggesting that main object of the state behind the imposition of such levy is to generate the revenue which is effected amid the present pandemic. Needless to say, State can justify its aforesaid act by stating it a regulatory or supervisory exercise in order to control the sale or crowd affecting the functioning of the liquor shops during initial days of opening amid the pandemic, however, State needs to pass quid pro test in order to justify its act.
Article 265 Of Indian Constitutions says that no tax can be levied or collected except the authority of law. No tax can be imposed by an executive order. Further, no restrictions could be imposed on right to carry on the trade which is guaranteed under article 19(1)(g) of the Constitution by mere executive orders without proper legislation and that the legislation, if any, must conform to the requirements of clause (6) of article 19 of the Constitution. Further, Section 28(2) of the Delhi Excise Act, 2009 clearly says to validate any increase or decrease in any duty mentioned in the schedule of the said act, it has to be passed by the legislative assembly. Thus, the Special levy imposed by the Excise Department of NCT Delhi is inconsistent with the provisions mentioned under the said as well as to the provisions mentioned under Indian constitution.
In light of above discussion, it can be said that there are many ambiguities in the notification dated 04.05.2020 issued by Govt. Of NCT Delhi for imposition of special levy on liquors. However, it will not be appropriate to give any definite conclusion in this regard as the matter is now pending before the High Court of Delhi.
[iii] (1)  S.C.R. 486
[iv] 1965 AIR 1358, 1965 SCR (1) 700
[v] DR. J.N Pandey: Constitutional Law of India: Central Law Agency: 49th Edition:2012
[vi] 1954 AIR 400
[vii] AIR 1957 P H 45