Special Corona Fee On Alcohol
This Blog is written by Priyanjali Priyadarshini from Tamil Nadu National Law University, Tiruchirappalli. Edited by Saumya Tripathi.
As the liquor shops re-opened in the cities, there could be seen an unprecedented crowd on the streets to buy liquor. This not only showcased the number of alcohol consumers in the country but also put the entire nation to a shame as the people were seen breaking the lockdown rules and the whole picture seemed nothing less than a chaos. Some without a mask, some in their night boxers, some holding big carry bags and some hovering over the shop to buy liquor; this was the scene which the whole nation saw on their television as the government in some states re-opened the liquor shops. The practise of social distancing was a far thought to the buyers.
Taking note of the whole pathetic situation and the ruckus created on the streets of Delhi after the re-opening of 150 state run liquor shops, the Delhi Government introduced “special corona fee” on alcohol on 4th May, 2020. The “special fee” comprises 70 percent of the MRP on all kinds of liquor consumed off the premises. For e.g., a liquor bottle costing Rs. 1000 will now cost Rs. 1700 to the buyers.
SIGNIFICANCE OF THE IMPOSITION OF FEE
Income from liquor sales is one of the larger sources of income of the state and so with the re-opening of shops and the imposition of “special fee”, the state revenue will come back to a normal to some extent as stoppage of work due to the pandemic and the government initiatives to help the poor and the migrant workers has caused the state revenue to gradually decrease. The Delhi Chief Minister was quoted as saying that the revenue earned by the government was even less than half of the revenue earned previously by the state and if the present situation continued, it would be difficult for the state government to even pay salaries to its employees.
The impact of the “special corona fee” was the increase in the state revenue. It was reported by the Delhi Excise Department that only after 15 days of the imposition of “special corona fee”, the state government earned over 110 crores from the cess. With more re-opening of shops, the revenue is likely to increase even further.
PUBLIC REACTION TO THE “SPECIAL FEE” IMPOSITION
A number of Public Interest Litigations (PILs) were filed in the Delhi High Court against the “special corona fee” on liquor. In one of the petitions it was contended that the fees are being collected arbitrarily and is more than the price authorized by law. It was contended that the 70 percent hike in prices of liquor was arbitrary and totally uncalled for. The price hike was bad in law as such a move by the government was not justified against breaking of social distancing norms. The petitioner challenged that the mere reading of Section 26* of the Delhi Excise Act 2009 does not justify the earning of revenue in the name of a new fee known as the “special corona fee. The petitioner also alleged that the Section 81** of the Delhi Excise Act 2009 imposed by the government was with mala fide intentions to charge fee from the buyers. Section 81 (2) (g) which is merely procedural and regulatory provision claimed by the state government unusually derives its power from the other lawful substantive provisions as further provided in the said Act. Therefore the petitioner in his final submission contended that since Section 26 and Rules 152 and 154 provide for no such category, the Delhi government cannot legally invoke Section 81 of the Act to charge extra fees in the name of “special corona fee” and clearly stated that the charging of extra money by the state government was illegal.
One of the petitions contended that the government action was completely irrational and violative of Article 14 of the Indian Constitution which guarantees “Right to Equality” to the citizens. It was contended that the government should refund the amount collected from the public through this “special corona fee”.
GOVERNMENT’S JUSTIFICATION OF THE MOVE
Replying to the PILs, the Delhi state government contended that the consumption of liquor is not a fundamental right and the state has the power to regulate its sales under the excise law. The government contended that the “special fee” was in result of the privilege of alcohol provided to the people during this time of pandemic. The government’s Excise Department said in an affidavit filed in response to the PILs that the “special corona fee” was a combination of price of such privilege and cost of regulation and supervision. The Delhi Excise Act, 2009 and the rules framed thereunder empower the state to provide a peculiar privilege or regulate/supervise the sale or consumption of alcohol in the time of COVID-19, particularly in view of the lockdown or directives issued by the Central or Delhi government and its Excise Department. A citizen therefore has no fundamental right to do trade or business in liquor or to consume liquor.
The Assistant Commissioner of Excise, Delhi Government informed the Delhi High Court that the Delhi Excise Act, 2009 and the rules framed thereunder empower the state government to regulate the sale, purchase and consumption of liquor and also to formulate policies, guidelines and provisions for liquor sales. The state is free to impose guidelines and earning a price for providing such privileges to the public. Furthermore, it was also stated that apart from the Delhi Government, ten more states had implemented this “special corona fee”. While challenging Section 26 and 28*** of the Delhi Excise Act 2009, the affidavit also laid importance to the fact that the MRP of liquor was not being raised, but used as a basis for calculating the amount of the “special corona fee”.
ANALYSIS OF THE SITUATION
Section 26 of the Delhi Excise Act 2009 empowers the state government to earn only four kinds of revenue, namely duty, license fee, duty registration fee and export- import fee. The government is not empowered to earn any other kind of revenue except those mentioned in Section 26 of the Act. Section 27 puts certain restrictions on the collection or recovery of revenue. By thorough reading of the aforesaid sections of the Act, one can conclude that no provision in the said Act talks about “special fee” although there is description of “special duty” in Section 2(23) of the Act. The state government has imposed the “special fee” in accordance with the provisions in Section 81 of the Delhi Excise Act 2009. However, the section states that the government can impose rules in consistence with the Act. Furthermore, Section 81(2)(g) gives the power to regulate the rate and manner of the payment of duty or fee not consistent with the provisions of the Act. Therefore, imposing a special levy without any amendment in the Act is bad in law.
The honourable Supreme Court in Commissioner of Income Tax v. Ajax Products Ltd. held that nothing can be taxed unless a provision clearly imposes the obligation to do so.
While relying on Tarver v. Albany in a particular case, the honourable Supreme Court had stated that it is necessary to ascertain the power or the purpose under which the amount is demanded. If the amount is demanded just for revenue purposes or for carrying on the business or occupation of the state without any further performance, it is a tax.
Therefore, the state has to considerably justify that the levying of “special corona fee” is to regulate the sale, purchase or consumption of liquor in the pandemic as it was necessary to do so. The state also has to justify that the levy is a “fee” and not a “tax” as the current provisions of the Act seem to justify the fact that the motive is to increase revenue in the guise of a “special fee”.
The amount of the “special fee” is so high that it can be clearly deduced that the main motive is to generate revenue at a time of slow financial growth due to the pandemic. Article 265 of the Constitution states that no tax can be imposed without the authority of law and the executive cannot impose any order of tax. Article 19(1)(g) of the Constitution states that no restrictions can be imposed on the right to carry on a trade without any proper legislation and if imposed on the basis of any legislation, then the legislation must conform to Article 19(6) of the Constitution. Further, Section 28(2) of the Delhi Excise Act 2009 clearly states that an increase or decrease in a tax can be validated only after passing from the legislative assembly and in the present case there was no order passed by the legislative assembly.
Therefore, the “special corona fee” imposed by the Excise Department of Government of Delhi is inconsistent with the provisions of the said Act and the Articles mentioned above.
Therefore, the imposition of “special corona fee” by the Government of Delhi on the sale of liquor is based on vague reasoning. However, as the matter is still pending in the High Court of Delhi, reaching any definite conclusion would not be valid.
Mere statement that the breaking of lockdown rules led the government to take such a stern step does not hide the lack of supervision and failure of the state government to manage the situation.
However, the government has started the system of e- coupon to maintain social distancing rules. The e- coupon system allows the people to visit a particular shop at a particular date and time. This may prove to be a better step to maintain social distancing practise. Corona virus has had a devastating effect on the daily life of the people. From the lifestyle changes to the changes in daily activities, the situation has brought even the government to a phase where such laws and rules have to be implemented whose implementation was unprecedent in nature.
* Section 26 of the Delhi Excise Act 2009 states the nature and components of excise duty. It states that the excise duty shall be levied by the state only under the following four heads- duty, license- fee, label registration fee and export- import fee.
** Section 81 of the Delhi Excise Act 2009 provides power to the state government to make rules inconsistent with the provisions of the Act.
*** Section 28 of the Delhi Excise Act 2009 states the power of the government to vary duty. This section of the Act empowers the state government to take necessary action to increase or decrease the levy on an intoxicant as deemed necessary by it.
 1965 AIR 1358, 1965 SCR (1) 700.
 127 Se A 58 (E).