State of Madhya Pradesh v. Tikam Das AIR 1975 SC 1429

STATE OF MADHYA PRADESH V. TIKAM DAS

ISSUE:

Whether the State Government has the authority to retrospectively apply enhanced license fees on the balance stock of intoxicants held by a licensee after the expiry of the license period?
Whether the balance stock of liquor, already subjected to the license fee at the time of its initial purchase, can be subjected to an enhanced fee retrospectively?

RULE:

Subordinate legislation, such as rules made by a delegate, can be given retrospective effect if explicitly or implicitly authorized by the parent statute.
The principles of equity and consistency in taxation justify applying enhanced fees to surplus stock retained by the licensee, ensuring parity with other vendors operating under the revised fee structure?

FACTS:

The respondent, Tikamdas, operated a bar in Indore under a license issued in Form F.L. 3 under the Madhya Pradesh Excise Act, 1915. This license was valid from April 1, 1963, to March 31, 1964.
On the expiration of the license period, the respondent had a significant quantity of surplus liquor stock that remained unsold in his licensed premises.
The respondent applied for and obtained a fresh license for the subsequent year starting April 1, 1964, to continue his bar operations.
Meanwhile, the State Government amended the Foreign Liquor Rules on April 25, 1964, increasing the scale of license fees. The amendment was given retrospective effect from April 1, 1964.
A new provision in the amended rules required licensees to pay the difference in fees for balance stocks if the scale of fees was enhanced during or after the license period.
The State Government demanded that the respondent pay the enhanced license fees for the liquor stock that remained in his possession as of March 31, 1964, under the retrospectively applicable amended rules.
The respondent contested the demand, arguing that the surplus stock had already been subjected to license fees at the earlier rate and could not be retrospectively charged at the enhanced rate.
The respondent filed a writ petition in the Madhya Pradesh High Court, asserting that the demand for enhanced fees violated his rights and lacked legal basis.
The High Court ruled in favor of the respondent, holding that the retrospective levy of enhanced fees on the surplus stock was unlawful.
The State of Madhya Pradesh, as the appellant, challenged this ruling in the Supreme Court by special leave petition, arguing that the amended rules allowed for retrospective application and justified the demand for enhanced fees.

HELD:

The Supreme Court held that subordinate legislation, such as rules framed under the Madhya Pradesh Excise Act, 1915, can have retrospective effect if explicitly or implicitly authorized by the parent statute.
The Court ruled that Sections 62 and 63 of the Excise Act empowered the State Government to promulgate rules and implement them retroactively. The amended Foreign Liquor Rules were validly applied from April 1, 1964.
The Court observed that the rule mandating the payment of enhanced fees on balance stock upon amendment was clear and enforceable. The surplus liquor stock held by the respondent as of March 31, 1964, fell within the scope of the retrospective rules.
The Supreme Court rejected the respondent’s argument that surplus stock could not be subjected to enhanced fees, reasoning that such an exemption would result in an unequal burden on vendors. New licensees beginning with fresh stock would be charged higher fees, creating inconsistency.
The Court emphasized that the respondent was permitted to retain the surplus stock under specific conditions, including the liability to pay any fee differences arising from subsequent enhancements.
The Supreme Court overturned the High Court’s ruling, holding that the State was within its rights to levy the enhanced license fees on the respondent’s surplus stock.
The appeal was allowed, but the Court directed both parties to bear their own costs, considering the relatively minor financial implications of the dispute.