Delhi High Court on Friday refused to grant interim stay on imposition of 'Special Corona Fee' on liquor in the national capital. However, it has issued notice to the Delhi Government.

Along with Delhi, many other states such as Karnataka, Kerala, West Bengal, Tamil Nadu, Rajasthan, and Haryana raised the levy on liquor through the hike in excise duty or through the special levy. Experts feel that more and more petitions expected in all these States.

Delhi Government, through a notification dated May 4, imposed 'Special Corona Fee' at the rate of 70 per cent of maximum retail price (MRP) on all categories of liquor sold through retail licences for consumption "off" the premises. This was done to mobilise additional revenue in the wake of the Covid-19 pandemic. However, there were some concerns on account of illicit trade and also on the modality of the imposition of levy, resulting in the filing of a bunch of public interest litigations in the High Court.

It was argued in the court that any levy over and above MRP is a violation of law as MRP refers to maximum price inclusive of all taxes and fees. "This cannot even be justified as a move towards the prohibition of alcohol it is extortionate and disproportionate, thus violative of Article 14 of the Indian Constitution," one petition said. Article 14 talks about Right to Equality, and it says: "The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India."

The petitioners contended that the levy is ultra vires the charging provisions of Delhi Excise Act and corresponding Rules. They argued that 'Rule-Making Powers' does not contain the power to charge such levy, challenging the invoking of section 81 of the Delhi Excise Act, 2009, i.e. general rule-making power to levy 'fee' which the statute does not contemplate. It was further said that imposition of the levy is arbitrary and has no nexus with a regulatory service in return, i.e. 'quid pro quo' by the State. After hearing the arguments, the court issued notices and listed the matter for May 29

Commenting on the case, Rajat Mohan, Senior Partner with AMRG said that the current health emergency has dried up the state exchequers, compelling the State to levy emergency levies to recoup the revenue deficits. Indian tax framework was not in a pandemic ready State, which is evident from the fact that the State of Delhi, like few others, levied 'Special Corona Fee' at the rate of 70 per cent on MRP which seems to be extortionate and disproportionate. The matter is now listed before Delhi High court for an early hearing.

"These are desperate times, and the State needs to undertake desperate measures. In any event, if this levy is held ultra vires then the government would be in dire need of other parallel sources to fund the revenue needs," he said.

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