Holding

The demand for still‑head duty under Condition 8 is a contractual liability, not an excise duty, and the rule of natural justice does not require a hearing for such a demand.

Summary

The State of Punjab sought recovery of still‑head duty from liquor vendors Ajudhia Nath and others who had failed to lift the quota of country liquor and to deposit the duty as required by Condition 8 of their licences. The vendors contended that still‑head duty was an excise duty that could be levied only on manufacturers and that they were denied a hearing before the demand was made. The Supreme Court examined whether still‑head duty falls within Entry 51 of List II of the Constitution and Section 31 of the Punjab Excise Act, and whether the rule of natural justice applies to a contractual demand for payment. The Court held that the duty is not an excise duty but a sum recoverable under a binding contract, and that the principle of hearing is not required for such a demand. Consequently, the High Court's judgment granting relief to the vendors was set aside and the appeals were allowed, dismissing the petitions under Article 226.

Issues considered

The nature of still‑head duty: whether it constitutes an excise duty under Entry 51 of List II and Section 31 of the Punjab Excise Act.
Whether the principle of natural justice (right to be heard) applies to the demand for payment of still‑head duty arising from Condition 8 of the licence.
Whether Condition 8 imposes a tax/duty or merely a contractual obligation enforceable without a hearing.

Legislation cited

Constitution of Indias. Entry 51 of List II, Schedule VII
Punjab Excise Acts. 31, s. 34

Subjects

excise dutystill‑head dutynatural justiceright to be heardlicence conditionscontractual obligationtax lawconstitutional lawPunjab Excise ActEntry 51

Judgment

686

A STATE OF PUNJAB AND ORS.
v.
AJUDHIA NATH AND ANR.

May 7, 1981
B
[ D.A. DESAI A.D. KOSHAL AND R.B. MISRA, JJ. ]

Punjab Excise Act and Rules made thereunder-Principle of natural justice of
giving opportunity to be heard does not come into play when the demand is merely
for payment of a sum becoming d11e under the conditions of the licence.
c Constitution of India, 1950, Entry 51 of List IT of Schedule VII read with ~
section 31 of the Punjab Excise Act-Still-head duty is neither a duty of excise nor
can be regarded as a tax of any kind whatsoever.

Condition 8 of the licence to run liquor vends in various parts of Punjab
during the financial year 1965-66 laid down: (i) the licencee shall lift each month
D the proportionate qtiota for the month fixed for his vends or deposit still-head
duty realisable thereof (ii) Any deficiency in the amount of still-head duty
realisable from the lifting of the full proportionate quota due to the short lifting
of the quota by the licencee or non-deposit of the still-head duty may be realised
from the amount of security deposited by the licencee at the time of grant of
licence; (iii) the resultant deficiency in the amount of security shall be made good
by the licencee within seven days of such adjustment and (iv) if there is short lift-
E ing of proportionate quota or short deposit of still-head duty continues for two
consecutive months or the licencee fails to make up the deficiency in the amount
of security within the prescribed period of seven days. his licence may be cancel-
led in addition to the recovery of still-head duty.

Respondent Ajudhia Nath who was granted the necessary licences under the
relevant provisions of the Punjab Excise Act and the Rules framed thereunder,
F was unable to lift the minimum quota of country liquor and also failed to deposit
the still-head duty which became payable by him under condition No. 8. On an
application made by him claiming relief in the matter of payment of sums which
bad fallen due, such relief wae granted to him in part by the Excise and Taxation
Commissioner, Punjab, on the ground that the liquor trade was badly affected by
reason of the movement of population in the border area of Punjab on account
of the hostilities which broke out between India and Pakistan in the month of
G September 1965. Not satisfied with the relief so granted Ajudhia Nath filed
two petitions under Article 226 of the Constitution before the High Court of
Punjab and Haryana claiming, inter alia, that still-head duty was an excise duty
which could be levied only on manufacture of goods and which he was not
liable to pay by reason of the admitted fact he was not a manufacturer of Liquor
and that he was not given the opportunity of being heard in the matter covered
H by the applications claiming relief. The petitions were allowed and the Letters
Patent Appeals preferred by the State wore dismissed. Hence the appeals by
special leave.
PUNJAB V. AJUDHIANATH 687
A
Allowing the appeals, the Court

HELD : 1. The demand for the short-fall in still-head duty was based on
the terms of a binding contract and it sought to enforce the liabilities arising
out of mutually agreed conditions of auction. Such a demand could not be
equated with a notice requiring the liquor vendor to show cause why his licence
should not be cancelled. Although an opportunity of being heard has to be B
given to a liquor vendor when his licence is sought to be cancelled, the same
principle of natural justice does not come into play when the demand is merely
for payment of a· sum becoming due under the conditions subject to which the
licence was granted. (691 G-H, 692A, E-F]

Har Shankar and others v. The Dy. Excise & Taxation Commissioner and
others [1973] 3 SCR 254; Shyam Lal v. State of Punjab, AIR 1976 SC 2045; State c
of Punjab v. Mu/kh Raj and Co., AIR 1977 SC 1550 and The State of Punjab v.
Balbir Singh and others, AIR 1977 SC 1717, followed.

2 : 1. A combined reading of Entry 51 of List II of Schedule VII to the

Constitution of India and section 31 of the Punjab Excise Act no doubt makes
it clear that a duty of excise on alcohalic liquors meant for human consumption D
cannot be recovered from a person unless any one of the three clauses of sec-
tion 31 covers his business activities. (693 C-D, 694A]

2 : 2. Still-head duty is not a duty of excise in view of the dicta laid
down by the Supreme Court to the effect that the short fall in still-head duty
represents nothing but sums recoverable from the licencees under a contract
which was entered into by them with their eyes open and that they cannot be 'E
allowed to have the best of both the worids by exploiting the contract so long
as it suits them and by repudiating it if and when it does not work to their
advantage. [694 B-C]

Har Shankar and others v. The Dy. Excise & Taxation Commissioner and
others, [1973] 3 SCR 254; State of Punjab v. Balbir Singh and others, AIR 1977
SC 1717, applied. .F
2 : 3. Condition No. 8 of the licence does not involve the imposition of a
duty of excise but makes provision only for recovery of sums becoming due
under a contract. The licencees are not connc.cted in any manner whatsoever
with the manufacture of alcohdic liquor and there was, therefore, no question at
all of levying a duty of excise on their operations which were confined merely to
the sale of liquor manufactur~d by others and which, therefore, commenced only G
ajler the process of manufacture was completely over. [696 E-G]

M/s. Bhajan Lal Saran Singh & Co. v. State of Punjab and others, 1967
Current Law.Journal (Punjab and Haryana) 450; State of M.P. v. Firm Goppu/al,
[1976] 2 SCR 1041; Excise Commissioner, U.P., Allahabad and othe-s v. Ram
Kumar and others, (1976] 3 sec 540, distinguished. H
3 : I. On the facts of this case still-head duty cannot be regarded as a tax
of some other kind nor can the question whether it does amount to such a tax
688 SUPREME COURT REPORTS [ 1981] 3 S.C.R.

A (for levying which the State. lacks authority) be allowed to be raised since it was
never raised at any earlier stage and its con,ideration is b.ound to work preju-
dice to the cause of the appellants. Further there is no impediment in the way
of the demand being regarded as the enforcement of an obligation arising under
the contracts which the Jicencees had entered into and exploited so long as the
same worked to their advantage and which were fully permissible under sub-
section (3) of section 34 of the Punjab Excise Act. [696 H, 697 A-Bl
B
3: 2. Clause (b) of sub-section (3) of section 34 of the Punjab Excise Act
allows impositions of conditions on grant of the licences in addition to the pay-.
ment of the licence fees which is a matter covered by clause (a). Condition
No. 8 is, therefore, fully enforceable and there is no reason why still-head duty l.
should be regarded as a tax of any kind whatsoever. [697 D-E]

c CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1665 and
1666 of 1970.

From the order dated the 25th July, 1968 of the Punjab and
Haryana High Court in LP A Nos. 230 & 240 of 1968.

D M.S. Dhillon for the Appellant in both the appeals.

Tirath Singh Munjraf, G.K. Arora, S.S. Munjra! and Gautam
Bannerjee for the Respondents in both the appeals.

The Judgment of the Court was delivered by
E KosHAL J. By this judgment·we shall dispose of Civil Appeals.
Nos. 1665 and 1C66 of 1970 in which common questions of law
have arisen for determination by this Court.

2. The facts leading to the two appeals are un-disputed
and may be briefly stated thus. Licences to run liquor vends in
F various parts of Punjab during the financial year 1965-66 were sold
by public auction shortly before the 1st April, 1965. Auctions were
held at numerous places subject to identical conditions which were
supplied to the bidders in writing. Condition No. 8 which i~ mate-
rial for our purposes is reproduced below:

G "That the licencee shall lift each month the propor-
tionate quota for the month fixed for his vend (s) or
deposit still-head duty realisable thereon. In the event of
any deficiency in the amount of still-head duty realisable ·
from the lifting of the full proportionate quota due to
H the short lifting of the quota by the Iicencee or non-deposit
of the amount of the still-head duty, the saicl deficiency
may be realised from the amount of security deposited by
PUNJAB v. AJUDH!ANATH (Kasha!, J.) 689

him at the time of grant of licence. The resulting defi- A
ciency in the amount of security shal(be made good by)he
licencee within 7 days of such adjustment. In case the short
lifting of proportionate qu')ta or short deposit of still-head
duty continues for two consecutive months or the licencee
fails to make up the deficiency in the amount of security
within the prescribed period of 7 days, his licence may be B
cancelled in addition to the recovery of deficiency in still-
head duty."

Ajudhia Nath who figures as respondent No. 1 in each of
the two appeals and who carries on business of selling country
liquor either in his own name or in the name and style of M/s. C
Ajudhia Nath Bal Mukand (a business concern arrayed as
respondent No. 2 in Civil Appeal No. 1665 of 1970) was the
highest bidder for the auctions · pertaining to 5 villages situated
in the district of Amritsar and a cou pie of villages in Ferozepur
district. Accordingly the auctions were sancti0ned in his favour D
and he was granted the necessary licences under the relevant pro-
visions of the Punjab Excise Act (hereinafter referred to as the Act)
and the rules framed thereunder.
The licencee started his liquour selling business in the said
seven villages on the !st April, 1965. By the close of the financial
year 1965-66, however, he was unable to lift the minimum quota of
E
country liquor and also failed to deposit the still-head duty which
became payable by him under condition No. 8 above extracted.
He made applications claiming relief in the matter of payment of
sums which had fallen due and such relief was granted to him in
part by the Excise & Taxation Commissioner, Punjab,, on the
ground that sales of country liquor had been adversely affected
F

.. by reason of the movement of population in the border areas of
Punjab on account of the hostilities which broke out between India
and Pakistan in the month of September 1965. Not satisfied with
the relief so granted Ajudhia,nath filed two petitions under article
226 of the Constitution of India before the High Court of Punjab
G
and Haryana claiming, inter alia, that still-head duty was an excise
duty which could be levied only on manufacture of goods and
which he was not liable to pay by reason of the admitted fact that
he was not a manufacturer of liquor. A grouse was also made by
him of the fact that the applications claiming relief had been decided
without affording to him an opportunity of being heard. One of
those petitions (Civil Writ Petition No. 2034 of 1966) related to H
690 SUPREME COURT REPORTS [1981] 3 S.C.R.

A vends functioning in the two villages of Ferozepur District, while the
other (Civil 'writ Petition Nos 2035 of 1966) covered the 5 vends loca-
ted in the 5 villages of Amritsar District. The petitions were allowed
by a single order dated the 9th May, 1967 passed by D.K. Mahajan,
J., on the sole ground that a similar petition (Civil Writ Petition
No. 2021 of 1966) had been allowed by Gurdev Singh, J., on the
B 27th March, 1966. The proceedings for the recovery of the short-
fall in the deposit of still-head duty by Ajudhia Nath which had
been initiated by the State of Punjab and its concerned officers
(appellants Nos. I to 4 in each of the appeals before us) were qua-
shed and the Excise and Taxation Commissioner, Punjab (appellant
No. 2 in both the appeals) was directed to dispose of the "cases"
c of the respondents "in accordance with law after hearing the peti-
tioners". D.K. Mahajan, J., adopted all the reasons on which Gurdev
Singh, J., had based his order above mentioned.

Letters Patent Appeals preferred by the 4 appellants to the
D Division Bench of the High Court were summarily dismissed by
Mehar Singh and Tuli, JJ., for the reason that a Letters Patent
Appeal against the judgment of Gurdev Singh, J., above mentioned
had met the same fate.

It is against the judgment of 'the Division Bench (which is
E dated the 29th August, 1969) that each of the appeals before us has
been filed.

3. Mr. Dhillon, learned counsel for the appellants had drawn
our attention to The State of Punjab v. Balbir Singh and Others,(1)
which reversed the judgment of Gurdev Singh, J., mentioned above
F and has contended that the very basis of the impugned judgment
has consequently fallen to the ground. The contention is correct.
As pointed out in Balbir Singh' s case (supra) the judgment of
Gurdev Singh, J., in Civil Writ Petition No. 2021 of 1966 had
proceeded merely on the ground that the petitioner-firm therein
had not beeen given an opportunity of being heard in relation to
G the demand notice issued to it for payment of the still-head duty
on the entire minimum quantity. of liquor which that firm was
requrred to lift under the licence. In differing with the view

(I) A.LR. 1977 SC 1717.
H
PUNJAB v. AJUDHIANATH (Kasha/, J.) 691

expressed by Gurdev Singh, J., this Court made a reference to the A
following observations of Chandrachud, J., (as he then was) in
Har Shanker and Others v. The Dy. Excise & Taxation Commissioner
and Others( 1 ) which was followed in Shyam Lal v. Stare of Punjab(2)

"The announcement of conditions governing the auc·
tions was in the nature of an invitation to an offer to those
B
who were interested in the sale of country liquor. The bids
given in the auctions were offers made by prospective ven-
dors to the Government. The Government's acceptance
of those bids was the acceptance of willing offers made to
it. On such acceptance, the contract between the bidders
c
and the Government became concluded and a binding
agreement came into existence between them. The success-
ful bidders were then granted licences evidencing the
terms of contract between them and the Government,
under which they became entitled to sell liquor. The licen-
cees exploited the respective licences for a portion of the
period of their currency, presumably in expectation of a
D
profit. Commercial considerations may have revealed an
error of judgment in the initial assessment of profitability
of the adventure but that is a normal incident of the trading
transactions. Those who contract with open eyes must
accept the burde11s of the contract along with its benefits.
E
The powers of the Financial Commissioner to grant liquor
licences by auction and to collect licence fees through the
medium of auctions cannot by writ petitions be ques-
tioned by those who, had their venture succeeded, would
have relied upon those very powers to found a legal claim.
Reciprocal rights and obligations arising out of contract do
F
not depend for their enforceability upon whether a con-
tracting party finds it prudent to abide by the terms of the
contract. By such a test no contract could ever have a
binding force."

and concluded that the demand for the short-fall in still-head G
·~ duty was based on the term of a binding contract and that it
sought to enforce the liabilities arising out of mutually agreed
conditions of auction. Such a demand, in the opinion of this

(I) (1973] 3 SCR 254. H
(2) A.LR. (1976] SC 2045.
692 SUPREME COURT REPORTS {1981) 3 S.C.R.

A Court, could not be equated with a notice requiring the liquor
vendor to show cause why his licence should not be cancelled. In
making this distinction this Court further relied upon State of
Punjab v. Mulkh Raj and Co.(1) wherein it was observed:-

"It was also held there that a cancellation of the licence
B
under section 36 of the Punjab Excise Act, 1914, had to
take place quasi-judicially after due service of the notice on
the Iicencee to show cause why it should not be cancelled.
Although, the merits of the last mentioned proposition need
not be examined by us as it rests on a sound footing, yet,
c we find it difficult to uphold the order that the demand for
a sum of Rs. 36,636 . On account of short-fall should also
be quashed on account of non-compliance with rules of
natural justice in cancelling the licence in proceedings under
section 36 of the Act. We think that the two liabilities
were erroneously considered by the High Court to be
D inextricably linked up .............................................. .

We do not think that, even if the respondent ought to
have been given a hearing before cancelling the licence,
E this would dispense with his liability to deposit the amount
of balance of the licence fee or invalidate the notice of
demand for it."

Thus, the proposition is by now well-settled that although
F an opportunity of being heard has to be given to a liquor vendor
when his licence is sought to be cancelled, the same principle of
natural justice does not come into play when the demand is merely
for payment of a sum becoming due under the conditions subject
to which the licence was granted, and this proposition fully covers
these appeals. The demands for payment of the amount of the
G still head duty which had become due under the contracts accepted
by the respondents and had remained unpaid were demands arising
under condition No. 8 above extracted and had, therefore, resulted
from the terms of those contracts. No question of elfording to the
respondents any opportunity of being heard thus arises and the
impugned judgment, is, therefore, liable to be reversed.
H
(I) A.LR. 1977 SC 1550.
PUNJAB v. AJUDHIANATH (Koshal, J.) 693

4. Faced with the above situation, Shri Munjral, learned A
eounsel for the respondents, raised· the following two conten-
tions:

(a) Still-head duty is a duty of excise which could only be
levied on a manufacturer and not on a mere vendor of
goods manufactured by others. B

(b) If the still-head duty mentioned in condition No. 8
above extracted cannot be regarded as a duty of excise,
it nevertheless amoants to a tax of some other kind for
levying which the State lacks authority.

5. Reliance in connection with contention (a) is placed on
c
Entry 51 of List II forming part of Schedule VII to the Constitu~
tion of India and on section 31 of the Punjab Excise Act. The
relevant portions of these provisions state :

Entry 51
D
"Duties of Excise on the following goods manufac-
tured 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; ........ . E
"

Section 31

"An excise duty or a countervailing duty, as the case
may be, at such rate or rates as the State Government F
shall direct, may be imposed, either generally or for any
specified local area, on any exci>able article-

(a) imported, exported or transported in accordance
with the provisions of section 16 ; or
G
(b) manufactured or cultivated under any licence
granted under section 20 ; or
(c) manufactured in any distillery established, or any
distillery or brewery licenced under section 21 ; ...
ff
"
694 SUPREME COURT REPORTS (1981] 3 S.C.R.

A These provisions leave no room for doubt that a duty of
excise on alcoholic liquors meant for human consumption cannot
be recovered from the respondents because none of the 3 clauses of
section 31 covers their business activities. But then the first part
of contention (a) that still-head duty is a duty of excise cannot be
accepted in view of the dicta in Har Shankar and others v. The Dy.
B Excise & Taxation Commissioner and others (supra) and The State of
Punjab v. Balbir Singh and others (supra) to the effect that the short-
fall in still-head duty represents nothing but sums recoverable by
the appe!lants under the terms of a contract which was entered into
by the respondents with their eyes open and that the latter cannot
c be allowed to have the best of both the worlds by exploiting the
contract so long as it suits them and by repudiating it if and when
it does not work to their advantage.

6. Shri M unjral has vehemently contended that still-head
duty is only another name for excise duty inasmuch as it is nothing
D more or less than a duty leviable on the manufacture of alcoholic
liquor. For this proposition he places reliance on a Division Bench
judgment of the High Court of Punjab & Haryana in M/s. Ehajan
Lal Saran Singh & Co. v. The State of Punjab and others (1) the
approval of that judgment by this Court in Civil Appeals Nos. 1042
and 1043 of 1968 decided on 21st August, 1972, State of Madhya
E Pradesh v. Firm Gappulal etc. (') and Excise Commissioner, U.P.,
Allahabad and others v. Ram Kumar and others (3). These authori-
ties, however, are of no help to him because, in every one of them,
the still-head duty which was mentioned in the condition corres-
ponding to condition No. 8 in the present case was either expressly
stated to be an excise duty or was assumed to be a duty of that
F character. In faCt, in the case of M/s. Bhajan Lal Saran Singh it
was conceded on behalf of the State before the High Court that ...
still-head duty was an excise duty and that is why the nature of the
charge as excise duty was taken for granted before the High Court
as well as in this Court. No question was either raised or decided
as to whether it could at all be regarded ':ls an excise duty. However,
G in later cases, namely, Har Shankar and others v. The Dy. Excise &
Taxation Commissioner and others, (supra) and The State of Punjab
v. Balbir Singh and others (supra) the demand for still-head duty
recoverable under condition No. 8 above extracted was specifically.

H (I) 1967 Current Law Journal (Pb of Haryana) 460.
(2) [1976] 2S.C.R. 1041.
(3) [t976J 3 sec 540.
PUNJAB v. AJUDHIANATH (Koshal, J.) 695

held to be a demand for money which had become due under an A
obligation created by terms of the contract. It is too late in the
day, therefore, for Shri Munjral to contend that such a demand
should be considered as one covering excise duty. He, however,
relies on the following passage in Har Shankar and others v. The
Dy. Excise & Taxation Commissioner and others (supra) :
B
"The second decision on which the appellants laid
stress was rendered by the High Court of Punjab and
Haryana in Jage Ram v. State of Haryana (C.W. No. 1376
of 1961 decided on March 12, 1968). The argument is that
this decision is based on the earlier decision.of the High
Court in Bhajan Lal v. State of Punjab (C.W. No. 538 of
c
1966 decided on February 6, 1967), that the decision in
Bhajan Lal's case was confirmed in appeal by this Court
(C.A. Nos. 1042 and 1043 of 1968 decided on August 21,
1972), that there is no material difference between the
rules and the procedure adopted in the instantcases and D
those which were struck down in Bhajan Lal's case and
therefore, the rules and the procedure followed herein must
also be struck down for the same reasons. This argument
overlooks the significant difference between the rules struck
down in Bhajan Lal' s case and in Jagc Ram's case and the
amended Rules now in force. Under the old Rule 36 (23-A) E
still-head· duty which was admittedly in the nature of
excise· duty was payable by the licencee even on quota not
lifted by him. The Rule and Condition No. 8 founded on
it were therofore struck down in Bhajan Lal's. case as being
beyond the scope of entry 51 of List II, the taxable event
under the impugned Rule being the sale and not the F
manufacturer of liquor. Rule 36 was amended on March 31,
1967 in order to meet the Judgment in Bhajan Lal's case but
the High Court found in Jage Ram's case that even under
the amended Rule, still-head duty which was in the nature of
excise duty was payable on unlifted quota of liquor. The
position obtaining under the Rules as amended on March 22, G
1968 which are relevant for our purposes is in principle
different as the still-head duty is now only 0. 64 paise as
against Rs. 17.60 per litre which was in force under the old
Rules and excise duty as such is no longer payable on unlijted
quota. The principle governing the decisions in Bhajan Lal' s H
696 SUPREME COURT REPORTS (1981] 3 S.C.IL

A case and loge Ram's case cannot, therefore, opp!)' any
longer".

(Emphasis supplied)

Special stress has been laid by Shri M unjral on the underlined
B portion of the passage above extracted and it is contended by him
that the judgments in the cases of Jage Ram and Bhajcn Lc.I wern
neither disapproved nor dissented from but were merely distinguished
in Hor Shankar's case, that while pointing out the distinction this
Court took it for granted that in those earlier cases the charge of still-
head duty~amounted to an excise duty and that condition No. 8 as
obtaining in the present case being identical with the corresponding
condition in those cases, it must be held that Har Shankar' s case is
an authority for the proposition that the said condition No. 8 seeks
to levy nothing lbut excise duty in the form of still-head duty. A
careful'perusal of the passage cited (which appears at first sight to
lend colour to the c;ontention) leaves no room for doubt, however,
D that in deciding Har Shankar's case this Court was not called upon
to adjudicate on the .Constitutional propriety of condition No. 8
above extracted, nor with the question as to the nature of the levy
covered by that condition. All that the Court said was that the
corresponding condition in Har Shankar's case was a very different
condition which could in no manner be construed to levy an excise
E duty. Besides, it was pointed out in the passage above quoted that
the still-head duty mentioned in the relevant condition in the earlier
cases (which was indentical with condition No. 8) was admittedly a
duty of excise--a fact to which we have already adverted while hold-
ing that condition No. 8 does not involve the imposition of a duty of
exercise but makes provision only for recovery of sums becoming due
F under a contract. We may also point out that the respondents are
not connected in any manner whatsoever with the manufacture of
alcoholic liquor and there was, therefore, no question at all of levying
a duty of excise on their operations which were confined merely
to the sale of liquor manufactured by others and which, therefore,
commenced only after the process of manufacture was completely
G over. For all these reasons, we repel the contention under
examination.

7. Contention (b) is also without substance and need not
detain us long. For one thing, it was never raised at any earlier
H stage and its consideration is bound to work prejudice to the cause
of the appellants. Secondly, as already pointed out above, there
PUNJAB v. AJUDHIANATH (Kasha!, J.) 697

is no impediment in the way of the demand being regarded as the A
enforcement of an obligation arising under the contracts which the
respondents had entered into and exploited so long as the same
worked to their advantage and which were fully permissible under
sub-section (3) of section 34 of the Punjab Excise Act. That sub-
section states :-
8
"(3) Every licence, permit or pass granted under this Act
shall be granted-

(a) on payment of such fees, if any,
(b) subject to such restrictions and on such conditions,
(c) in such form and containing such particulars,
c
(d) for such period,

as the Financial Commissioner may direct".

According to Shri Munjral the payment of licence fees is D
provided for in the conditions of auction apart from condition No. 8
and, therefore, the latter cannot be regarded as providing for any·
thing but the levy of a duty of excise or of some other kind. The
argument is fallacious in view of the language of clause (b) of the
sub-section just above reproduced. That clause allows the imposition
of conditions on the grant of a licence, in addition to the payment E
of the licence fees which is a matter covered by clause (a). Condition
No. 8 is, therefore, fully enforceable and there is no reason why
still-head duty should be regarded as a tax of any kind whatsoever.

8. For the reasons stated, both the appeals are accepted and
the impugned judgment. which cannot be sustained, is reversed so.
that both the petitions under article 226 of the Constitution of India
F
filed by the respondents before the High Court and accepted by it
are dismissed. However, we leave the parties to bear their own
costs.

V.D.K. Appeals allowed.
G