The Bombay High Court has vacated demand notices exceeding ₹236 crore issued by the Water Resources (Irrigation) Department against United Spirits Limited, which related to water charges for its liquor manufacturing unit. The notices had been premised on a classification of all water withdrawn from the Godavari River by the company as raw material. The court held that this approach was impermissible because the authorities had not distinguished between water used as raw material and water consumed for ancillary processes during manufacturing.
In its decision, a Division Bench of two judges observed that while the tariff orders of the Maharashtra Water Resources Regulatory Authority (MWRRA) issued in 2018 and 2022 were not unconstitutional per se, the implementing authorities had committed a legal flaw in applying them. The court found that authorities had adopted an arbitrary stance by treating every drop of water drawn as if it formed part of the raw material for liquor production. They had not undertaken any inquiry or calculation to segregate water used in direct production from water used in processes such as cooling, washing, or other auxiliary operations. The court described this failure as unsustainable and arbitrary.
The industrial unit in question is a distillery operated by United Spirits in Dharmabad, within Nanded district. The company challenged sequential demand notices that had been raised since December 2018. In those notices, the State had designated the unit under the “raw material industry” tariff slab, attracting higher water charges of ₹240 per cubic metre. United Spirits countered that only a portion of the water intake was truly raw material, while the bulk served process-related requirements. The company also contended that earlier High Court rulings had held that the classification of water consumption must account for proportional use. The State, by contrast, maintained that liquor manufacturing fell squarely in the raw material category, and pointed to a report by the National Environmental Engineering Research Institute (NEERI) to argue that most of the water consumed by the unit should be treated as raw material usage.
Rejecting United Spirits’ contention that the tariff orders themselves were arbitrary or unconstitutional, the court reaffirmed their validity under the MWRRA statute. However, the court found fault in the manner of their enforcement. The court struck down both the orders passed by the Primary Dispute Resolution Officer (PDRO) and the appellate authority, along with all demand notices gathered since 2018—including the large demand of ₹236.5 crore issued in August 2022. At the same time, the court ordered United Spirits to make a deposit of ₹66.5 crore within six weeks. This deposit, the court clarified, would be adjustable against future recalculated bills, and was to be guided by precedent that estimates 65% of water consumption in brewery operations may reasonably be treated as raw material usage.
Furthermore, the court directed that a fresh assessment be conducted. The Executive Engineer of the Water Resources Department has been tasked with inspecting the distillery unit and reviewing materials submitted by the company, and must complete the reassessment within three months. That exercise must respect principles of natural justice. The court stipulated that any excess deposit made by United Spirits over what is ultimately found due shall be adjusted in subsequent bills.
In connection with representation in the case, United Spirits appeared through Senior Advocate Zal Andhyarujina along with a team of advocates from its counsel. The State was defended by its counsel comprising several advocates. The court’s order concludes that while the statutory tariff framework is valid, its arbitrary and mechanical application by the authorities cannot stand, and mandates a fair, fact-based reassessment of water charges owing by the company.
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