State of Haryana & Ors Vs. Jage
Ram & Ors [1980] INSC 91 (21 April 1980)
CHANDRACHUD, Y.V. ((CJ) CHANDRACHUD, Y.V.
((CJ) SHINGAL, P.N.
REDDY, O. CHINNAPPA (J)
CITATION: 1980 AIR 2018 1980 SCR (3) 746 1980
SCC (3) 599
CITATOR INFO :
APL 1983 SC1207 (2,14) RF 1984 SC1326 (8) R
1987 SC 933 (13,14,15) R 1988 SC 771 (5)
ACT:
Writ Jurisdiction-Article 226 of the
Constitution of India 1950 Petition under reciprocal rights and obligations
arising out of Contract cannot be enforced-Excise duty, Fees, and Price for
parting with the Privilege by State, explained-Punjab Excise Act (Act 1 of
1974) and Punjab Liquor Licence Rules, 1956 as amended upto 22-3-68-Whether
notice of re-auction necessary under Rule 36(3) of the Liquor Licence Rules.
HEADNOTE:
In the auction for the financial year 1967-68
held on March 27, 1967 for the retail vend known as "Biswan Meel"
Sonepat, the respondents offered the highest bid for a quota of Rs. 62,100
proof liters for which they became liable under condition 14(iii) of the
auction to pay an amount calculated at the rate of Rs. 17.60 per litre that is
to say, Rs. 10,92,960-00. On the bid being knocked in their favour, respondents
deposited a sum of Rs. 45,527-50 being 1/24th of the total amount payable by
them by way of security for the due performance of the terms of the auction, as
required by condition No. 15(1) of the auction and Rule 36 (22A) of the Punjab
Liquor Licence Rules, 1956 as amended. They started operating the vend from
April 1, 1967.
The successful bidder who is granted licence
for retail sale of country liquor is required by condition No. 15(ii) of the
auction read with rule 26(23)(2), to pay the licence fee in 22 equal
instalments, each instalment being payable before the 10th and 25th of every
month, commencing on April
10. On the failure of the respondents to pay
the instalments due for the periods ending with April 10 and 25 1967, the
Excise and Taxation Officer, Rohtak, gave them notices dated 15th and 25th
April, 1967 calling upon them to make good the short-fall of Rs. 33,827.20 and
Rs. 5,898.80 respectively, before April 20 and April 30, 1967. Since the
respondents did not pay the amount, the Deputy Excise and Taxation
Commissioner, Headquarters, Haryana, gave them a notice calling upon them to
show cause, within two days of the receipt of the notice, why their licence
should not be cancelled under section 36(c) of the Punjab Excise Act, for their
failure to comply with the terms of the auction in the matter of payment of the
two instalments. By their reply dated May 12, 1967, the respondents stated that
they were illiterate villagers, that the terms of auction were not explained to
them, that the district of Rohtak was in the grip of severe drought leading to
a fall in the sale of liquor, that April being a summer month, the consumption
of liquor was less as compared with the consumption during winter months and
that, there was in fact no default on their part as alleged in the notice sent
to them. On May 17, 1967, the Collector and Deputy Excise & Taxation Commissioner,
Haryana, passed an order, after hearing the respondents, cancelling their
licence under section 36(b) and (c) of the Punjab Excise Act with immediate
effect and stating that the vend will be resold on May 23, 1967 at 10.00 A.M.
in the office of the Excise and Taxation Officer Rohtak, at the risk of the
respondents.
747 On May 22, 1967 respondents filed a Writ
Petition (No. 900 of 1967) which was dismissed by the High Court of Punjab and
Haryana on May 26, on the ground that it was premature.
In pursuance of the order dated May 17, the
"Biswan Meel" vend, Sonepat, was re-auctioned on May 23, 1967, the
highest bid received being of 15000 litres, which in terms of money comes to
Rs. 2,46,000.00. The difference between the amount which the respondents were
liable to pay under their bid and the amount realised in the re-auction comes
to Rs. 7,41,577.40.
On July 11, 1967 respondents were served with
a notice dated July 7 by which they were called upon to pay the aforesaid
amount, failing which, they were warned, the amount was able to be recovered as
arrears of land revenue.
On July 18, respondents filed a Writ Petition
in the High Court challenging the legality of the aforesaid notice.
Following an earlier decision in Bhajan Lal
Saran Singh
Journal, p. 460, which was affirmed by this
Court in CA 1042 and 1043/68 dt. 21-8-72, the High Court allowed the writ
petition and quashed the order cancelling the respondents' licence and calling
upon them to pay the difference between the amount payable by them under their
bid and the amount realised in the re-auction of the vend. It has given to the
appellants a certificate to appeal to this Court under Article 133(1) (a) of
the Constitution since the subject matter in dispute was of the value of more
than Rs. 20,000 at the time when the Writ Petition was filed, as also on the
date of the proposed appeal.
Allowing the appeal, the Court ^
HELD:: 1. The Writ jurisdiction of the High
Court under Article 226 of the Constitution is not intended to facilitate
avoidance of contractual obligations voluntarily incurred by the petitioner.
[755 D] In the instant case the High Court was in error in entertaining the
writ petitions for the purpose of examining whether the respondents could avoid
their contractual liability by challenging the Rules under which the bids
offered by them were accepted and under which they became entitled to conduct
their business. It cannot ever be that a licencee can work out the licence if
he finds it profitable to do so; and he can challenge the conditions under
which he agreed to take the licence, if he finds it commercially inexpedient to
conduct his business. The occurrence of commercial difficulty, inconvenience or
hardship in the performance of those conditions, like the sale of liquor being less
in summer than in winter, can provide no justification for not complying with
the terms of the contract which they had accepted with open eyes. [755 F, 756
C-D] Har Shanker and Ors. v. The Deputy Excise and Taxation Commissioner and
Ors., [1975] 2 SCR 254 @ 266; Sham Lal v. State of Punjab, AIR 1976 SC 2045,
followed.
Bhajan Lal Saran Singh & Co. v. State of
Punjab, [1967] Current Law Journal, p. 460; overruled.
2. There is no doubt that a distinction does
exist between the Rules which were impugned in Bhajan Lal, and in the instant
case on one hand and the 748 Rules which were impugned in Har Shanker's case on
the other. In fact in Har Shanker's case the impugned Rules were those as
amended on 22-3-68 in order to meet the judgment of the High Court under appeal
in the instant case. Even assuming that there is a material difference in the
Rules which are impugned in the instant case and those in Har Shanker's, yet
the jurisdiction of the High Court is a bar to the respondents to wriggle out
of their contractual obligation. [756 E-H] In Har Shanker's case, this Court
held that since rights in regard to the manufacture and sale of intoxicants are
vested in the state; it is open to it to part with these rights for
consideration; that the amounts which are charged to the licensees who offer
their bids in auction sales of vends are neither in the nature of a tax nor in
the nature of excise duty; and that, the true nature of the charge which the
Government levies in such cases is that it is price which the State charges as
a consideration for parting with its privileges in favour of licensee. Such a
charge is a normal incident of a trading or business transaction. What the
State could itself do in the exercise of its privilege, it authorises another
to do by charging a price for parting with its privilege. A price can neither
be a tax nor excise duty. Therefore, even if any concession was made in the
High Court, the true legal position that the amounts which the respondents
became liable to pay under the terms of the auction is not excise or still-head
duty but is a price which the Government charged for parting with its
privilege, during the current of the period covered by the contract.
The amount which the respondents agreed to
pay to the State Government under the terms of the auction is neither a fee
properly so called which would require the existence on a quid pro quo, nor
indeed is the amount in the nature of excise duty, which by reason of the
constitutional constraints has to be primarily a duty on the production or
manufacture of goods produced or manufactured within the country. The
requirement to multiply by a certain figure per proof-litre the quota for which
the respondents gave their bid by a certain figure and the facility of paying
the amount by instalments while lifting the quota from time to time, do not
make such payment an excise or still-head duty.
What the Government is trying to recover from
the respondents is not excise duty on undrawn liquor. [757 B-D, 758 A-C, E-F,
759 A] Panna Lal v. State of Rajasthan, [1976] 1 SCR 219;
Bimal Chandra Banerjee v. State of Madhya
Pradesh, [1971] 1 SCR 844; State of Madhya Pradesh v. Firm Gappu Lal etc.,
[1976] 2 SCR 1041 and Excise Commissioner U.P., Allahabad v.
Ram Kumar, [1976] Suppl. SCR 532; distinguished.
[The Court remanded the case for a finding on
the following two questions: (1) Whether it was necessary according to the
rules in force at the relevant time to give adequate publicity to the re-auction
and (2) if so, when such publicity was in fact given to the re-auction on May
23, 1967] & CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1507/1969.
From the Judgment and Order dated 12-3-1969
of the Punjab and Haryana High Court in Civil Writ No. 1376/67.
S. N. Kacker Sol. Genl., Ravinder Rana and M.
N. Shroff for the Appellants.
749 Tirath Singh Munjral, H. K. Puri and V.
K. Bahl for Respondent No. 1 The Judgment of the Court was delivered by
CHANDRACHUD, C.J.-This is an appeal by certificate granted by the High Court of
Punjab and Haryana under Article 133(1)(a) of the Constitution in regard to its
judgment dated March 12, 1968 in Civil Writ No. 1376 of 1967.
On March 16, 1967 the Excise and Taxation
Commissioner, Haryana, appellant No. 2 herein, announced by publication of a
notice that excise auctions for the financial year 1967-68 will be held on
March 27, 1967. The terms and conditions in regard to the auction of retail
vends of country spirits were set out in a pamphlet issued along with the
notice.
Those terms and conditions did not accord
with the rules then prevailing but were evidently announced so as to comply
with the requirement of the new rules which were being brought into force. The
amended rules issued by the Excise and Taxation Commissioner (Financial
Commissioner) were published in the Government Gazette dated March 31, 1967 and
came into effect on April 1, 1967.
In the auction held on March 27, 1967 for the
retail vend known as "Biswan Meel", Sonepat, respondents offered the
highest bid for a quota of 62,100 proof litres for which they became liable,
under condition 14(iii) of the auction, to pay an amount calculated at the rate
of Rs. 17,60 per litre, that is to say, Rs. 10,92,960.00. On the bid being
knocked in their favour, respondents deposited a sum of Rs. 45,527.50, being
1/24th of the total amount payable by them, by way of security for the due
performance of the terms of the auction, as required by condition No. 15(1) of
the auction and Rule 36(22-A) of the Punjab Liquor Licence Rules, 1956 as
amended. They started operating the vend from April 1, 1967.
The successful bidder who is granted licence
for retail sale of country liquor is required by condition No. 15(ii) of the
auction read with Rule 36(23)(2), to pay the licence fee in 22 equal
instalments, each instalment being payable before the 10th and 25th of every
month, commencing on April
10. On the failure of the respondents to pay
the instalments due for the periods ending with April 10 and 25, 1967, the
Excise and Taxation Officer, Rohtak, gave them notices dated 15th and 25th
April, 1967 calling upon them to make good the short-fall of Rs. 33,827.20 and
Rs. 5,898.80 respectively, before April 20 and April 30, 1967. Since the
respondents did not pay the amount, the Deputy Excise and Taxation
Commissioner, Headquarters, Haryana, gave them a notice calling upon them to
show cause, within two days of the 750 receipt of the notice, why their licence
should not be cancelled under section 36(c) of the Punjab Excise Act, for their
failure to comply with the terms of the auction in the matter of payment of the
two instalments. By their reply dated May 12, 1967, the respondents stated that
they were illiterate villagers, that the terms of auction were not explained to
them, that the district of Rohtak was in the grip of a severe drought leading
to a fall in the sale of liquor, that April being a summer month, the
consumption of liquor was less as compared with the consumption during winter
months and that, there was in fact no default on their part as alleged in the
notice sent to them. On May 17, 1967, the Collector and Deputy Excise &
Taxation Commissioner, Haryana, passed an order, after hearing the respondents,
cancelling their licence under section 36(b) and (c) of the Punjab Excise Act
with immediate effect and stating that the vend will be resold on May 23, 1967
at 10.00 A.M. in the office of the Excise and Taxation Officer, Rohtak, at the
risk of the respondents.
On May 22, 1967 respondents filed a Writ
Petition (No. 900 of 1967) which was dismissed by the High Court of Punjab and
Haryana on May 26, on the ground that it was premature.
In pursuance of the order dated May 17, the
"Biswan Meel" vend, Sonepat, was re-auctioned on May 23, 1967, the
highest bid received being of 15,000 litres, which in terms of money comes to
Rs. 2,46,000.00 The difference between the amount which the respondents were
liable to pay under their bid and the amount realised in the re-auction comes
to Rs. 7,41,577.40.
On July 11, 1967 respondents were served with
a notice dated July 7 by which they were called upon to pay the aforesaid
amount, failing which, they were warned, the amount was liable to be recovered
as arrears of land revenue. On July 18, respondents filed the present Writ
Petition in the High Court challenging the legality of the aforesaid notice.
The High Court allowed the Writ Petition and quashed the order cancelling the
respondents' licence and calling upon them to pay the difference between the
amount payable by them under their bid and the amount realised in the re-auction
of the vend. It has given to the appellants a certificate to appeal to this
Court under Article 133(1)(a) of the Constitution since the subject matter in
dispute was of the value of more than Rs. 20,000 at the time when the Writ
Petition was filed, as also on the date of the proposed appeal.
It is no longer in dispute that the auction
at which the respondents' bid was accepted is governed by the Punjab Liquor
Licence Rules, 1956 as amended by the notification dated March 31, 1967 issued
by 751 the Excise and Taxation Commissioner, Haryana, which came into force on
April 1, 1967. The amended rules, in so for as they are relevant for our
purpose, read thus:
36. (1) Subject to such changes as the
Financial Commissioner may make each year before the annual auctions the
Collector shall, on the basis of the probable sales during the next licence
year determine, in the case of country liquor vends, the minimum quota of
country liquor and the licence fee calculated thereon ..........The minimum
quota and the licence fee calculated thereon........, for each vend shall be
announced by the Presiding Officer at the time of auctions.
36. (16) Bids in respect of country liquor
vends shall be received in terms of quota of country spirit in proof litres to
be lifted during the whole year, and the successful bidder shall be liable to
pay licence fee calculated by multiplying the quota bid by Rs.
36. (22-A) A person to whom a country spirit
shop has been sold shall deposit in a Government Treasury under head
"Licence fee on country spirit" subordinate to Majo ead "X-State
Excise Duties" by way of security an amount equivalent to
one-twenty-fourth of the amount of the licence fee determined under clause (16)
within a period of seven days of the date of auction and the aforesaid amount
of security shall be refundable to him at the end of the year, unless the same
or any part thereof is forfeited or adjusted against any amount of fee, duty or
penalty due from him in respect of his licence. In the event of the amount of
security deposit or any part thereof being forfeited or adjusted as aforesaid
the deficiency shall be made good by him within seven days of the happening of
such an event failing which the licence shall be liable to cancellation by the
Authority by which it was granted.
36. (23) (2) A person to whom a country
spirit shop is sold shall pay the amount or licence fee as calculated under
clause (16) in 22 equal instalments, each instalment being payable on the 10th
and 25th of each month starting from the month of April. In the event of
failure to pay the instalment by the due date, his licence may be cancelled.
36. (23) (3) Notwithstanding anything
contained in sub-clause (2)(a) the licensee shall be entitled to deduct from
the amount of the licence fee to be paid by him such amount of still-head duty
as may have been actually paid by him on the 752 quota of country spirit
actually lifted by him not exceeding the amount of such duty payable in respect
of the quota bid by him at the time of auction.
36. (24) When a licence has been cancelled,
the Collector or an Officer not below the rank of Excise and Taxation Officer
authorised by him in this behalf may resell it by public auction or by private
contract in accordance with the procedure laid down in this rule and any
deficiency in the licence fee and all expenses of such resale or attempted
resale shall be recoverable from the defaulting licensee in the manner laid
down in section 60 of the Punjab Excise Act, 1914........
The High Court has summarised correctly the
position emerging out of these rules in these words:
"The auction is on the basis of the
quota that has to be lifted for each particular shop. In order to convert it in
terms of money, each proof litre bid is multiplied by Rs. 17.60 and that is
how, the fee for a particular shop is fixed. The licensee is required to
deposit one-twenty-fourth of the amount so arrived at as security. He is then
to lift the quota specified for each month in the Rules and if he fails to do
so, the amount shortlifted in terms of the licence-fee for that month is
deducted from his security amount and he is required to make good the
deficiency in the security.
He may not sell even a litre of liquor; but
whatever quota of liquor he has bid for, the money value of that quota by multiplying
it by Rs. 17.60 per litre has to be paid by him. There is no escape from
this." One of the contentions raised before the High Court was that the
licence fee charged to the respondents, for failure to pay which their licence
was cancelled, was not fee properly so called but was 'stillhead' duty or
excise duty;
and the rule requiring the payment of such
duty, even when no quota of liquor was actually lifted by the licensee, was
unconstitutional for the reason that there can be no liability to pay still-head
duty or excise duty unless the licensee takes or lifts the liquor. The High
Court compared the Punjab Liquor Licence Rules of 1956 as they existed in 1966
and the Rules as amended in 1967 and came to the conclusion that, in substance,
there was no difference in the nature of payment which the licensee was liable
to make under the two sets of rules: what he has to pay under both is
still-head duty or excise duty.
In M/s. Bhajan Lal Saran Singh & Co. v.
The State of Punjab and others, (Civil Writs Nos. 538 and 1991 of 1966), the
High Court had 753 struck down the relevant Rules of 1966 by holding that the
levy, charge or recovery of any amount of still-head duty in respect of liquor
which had not been actually lifted by the licensee was not justified and that
the demand to that extent was liable to be quashed. In the instant case, since
the liability under the 1967 rules was of a similar nature as the liability
under the 1966 Rules, the High Court followed the Judgment in Bhajan Lal,
(supra) quashed the levy and set aside the order whereby the respondents'
licence was cancelled and they were called upon to pay the difference between
the amount which they had agreed to pay under the terms of their auction and
the amount realised in the re-auction of the vend.
The sheet-anchor of the respondents' argument
before us is that the decision of the High Court in Bhajan Lal was affirmed by
this Court in Civil Appeals 1042 and 1043 of 1968 (decided on August 21, 1972)
and since, in the instant case, the High Court has merely followed the decision
in Bhajan Lal, the State's appeal must fail. If the matter were to rest there,
as assumed by the respondents' counsel Shri Tirath Singh Munjral, the
contention would be unassailable because the position would then approximate to
the application of a mathematical formula: Bhajan Lal was affirmed by this
Court; the judgment of the High Court in the instant case follows Bhajan Lal;
the judgment under appeal must therefore be upheld. But after the decision of
the High Court in Bhajan Lal (supra) was affirmed by this Court on August 21,
1972, the legal position has been further examined by a Constitution Bench of
this Court in Har Shankar & Ors. v. The Dy. Excise & Taxation
Commissioner & Ors. The learned Solicitor General places strong reliance on
that decision and contends that the judgment of the High Court must, in the
light of that decision, be over-ruled. We must proceed to consider the decision
in Har Shankar straightaway.
Har Shankar was a case from Punjab and though
the instant case is from Haryana, the liquor auctions in both the cases are
governed by the Punjab Excise Act, 1 of 1914, and the Punjab Liquor Licence
Rules, 1956, as amended from time to time. Har Shankar's case has an
interesting relationship with the present proceedings because it was as a
result of the decision of the Punjab and Haryana High Court in the instant
case, which was rendered on March 12, 1968 that the Punjab Liquor Licence Rules
were further amended on March 22 and the auction impugned in Har Shankar was
held on March 23, 1968. The liability arising under the auction in Har Shankar
was upheld by the High Court and this Court, not under the Rules which are
relevant in the instant case, but under the Rules which were amended in order
754 to meet the judgment of the High Court in the instant case.
This, from the respondents' point of view,
would apparently furnish an important consideration for distinguishing the
decision in Har Shankar But, as we will presently point out, the Solicitor
General relies upon that decision on an aspect which is altogether different
and of fundamental importance.
In Har Shankar, the appellants' bid was
accepted in an auction held on March 23, 1968 for the right to sell country
liquor at two vends in Ludhiana. The appellants paid the security deposit but
were unable to meet their obligation under the conditions of auction and fell
in arrears. When the State demanded the payment, threatened to cancel the
licences granted to the appellants and declared its intention to resale the
vends, the appellants filed writ petitions in the High Court of Punjab and
Haryana asking that the auction be quashed and the respondents be restrained
from enforcing the obligation arising under its terms and conditions. The High
Court having dismissed the writ petitions, the licensees filed an appeal to
this Court by certificate.
What is important for our purpose in this
appeal is that the State of Punjab, which was respondent to the appeal in Har
Shankar, (supra) raised a preliminary objection to the maintainability of the
writ petitions filed by the appellants and that objection was upheld by this
Court. The preliminary objection was that such of the appellants who offered
their bids in the auctions did so with a full knowledge of the terms and
conditions attaching to the auctions and that they could not be permitted to
wriggle out of the contractual obligations arising out of the acceptance of
their bids. Holding that the preliminary objection was well-founded, this Court
observed:
"Those interested in running the country
liquor vends offered their bids voluntarily in the auctions held for granting
licences for the sale of country liquor. The terms and conditions of auctions
were announced before the auctions were held and the bidders participated in
the auctions without a demur and with full knowledge of the commitments which
the bids involved. The announcement of conditions governing the auctions were
in the nature of an invitation to an offer to those who were interested in the
sale of country liquor. The bids given in the auctions were offers made by
prospective vendors 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 and the Government became concluded and a binding
agreement came into existence between them. The successful bidders were then
granted licences 755 evidencing the terms of contract between them and the
Government, under which they became entitled to sell liquor. The licensees
exploited the respective licences for a portion of the period of their
currency, presumably in expectation of a 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 trading transactions. Those
who contract with open eyes must accept the burdens of the contract along with
its benefits. 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 questioned 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 not depend for their enforceability
upon whether a contracting party finds it prudent to abide by the terms of the
contract. By such a test no contract could ever have a binding force."
(page 263) At page 266 of the Report, the Court further observed that the writ
jurisdiction of High Courts under Article 226 was not intended to facilitate
avoidance of obligations voluntarily incurred.
The Writ Petitions filed by the respondents
in the High Court in the instant case are open precisely to the same objection
which was upheld by this Court in Har Shankar (supra). They entered into a
contract with the State authorities with the full knowledge of conditions which
they had to carry out in the conduct of their business, on which they had
willingly and voluntarily embarked. The occurrence of a commercial difficulty
inconvenience or hardship in the performance of those conditions, like the sale
of liquor being less in summer than in winter, can provide no justification for
not complying with the terms of the contract which they had accepted with open
eyes. The respondents could not therefore invoke the writ jurisdiction of the
High Court to avoid the contractual obligation incurred by them voluntarily. On
this ground alone, the State is entitled to succeed in this appeal.
The judgment in Har Shankar was followed in
Sham Lal v. State of Punjab wherein, appellants were the highest bidders in an
auction for the sale of country liquor vends at various places in the State of
Punjab. The appellants were called upon by the State to pay the amounts which
they were liable to pay under the terms of the auction, 756 whereupon they
filed writ petitions in the High Court to challenge the demand. Relying upon
the passage from Har Shankar (supra) extracted above, the Court held that the
licensees could not be permitted to avoid the contractual obligations
voluntarily incurred by them and that therefore the High Court was right in
refusing to exercise its jurisdiction under Article 226 of the Constitution in
their favour.
In view of these decisions, the preliminary
objection raised by the learned Solicitor General to the maintainability of the
writ petitions filed by the respondents has to be upheld. We hold accordingly
that the High Court was in error in entertaining the writ petitions for the purpose
of examining whether the respondents could avoid their contractual liability by
challenging the Rules under which the bids offered by them were accepted and
under which they became entitled to conduct their business. It cannot ever be
that a licensee can work out the licence if he finds it profitable to do so;
and he can challenge the conditions under which he agreed to take the licence,
if he finds it commercially inexpedient to conduct his business.
Learned counsel for the respondents has
called our attention to the distinction, which this Court drew in Har Shankar,
(supra) between the Rules which were impugned in Har Shankar on one hand, and
those which were impugned in Bhajan Lal, (supra) and in the instant case on the
other.
There is no doubt that such a distinction
exists. In fact, the judgment of the Punjab and Haryana High Court which is
impugned before us was specifically referred to at page 282 of the Report in
Har Shankar but was distinguished on the ground that the rules in the two sets of
cases were different. As we have already pointed out, the licensing rules were
amended on March 22, 1968 because of the judgment which the High Court gave in
this case on March 12, 1968 and the auction in Har Shankar was held in
pursuance of the amended rules on March 23, 1968. But that, to our mind, is a
separate matter altogether. Even if it be true that there is difference between
the rules involved in the present case and those which came up for examination
in Har Shankar, the preliminary objection rests on an entirely different basis
which would remain unaffected by the difference in the two sets of Rules. We
must therefore affirm that, even assuming that there is a material difference
in the Rules which are relevant for our purpose and the Rules which were
impugned in Har Shankar, (supra) the writ petitions filed by the respondents
are liable to fail on the narrow ground on which the preliminary objection of
the State was upheld in Har Shankar.
757 Apart from the fact that the respondents'
writ petitions are liable to fail on the ground stated above, the State's
appeal must succeed on another ground canvassed by the learned Solicitor
General which was also urged and accepted in Har Shankar. It was observed in
Har Shankar that the main focus of controversy on the merits of the matter
related to the power of the Government to levy and realise large licence fees
either through the medium of auctions or on scales fixed under the rules. After
referring to the long history of liquor licensing and after considering the
various provisions of the Punjab Excise Act 1914 and the Rules framed
thereunder, this Court held that since rights in regard to the manufacture and
sale of intoxicants are vested in the State, it is open to it to part with
those rights for consideration; that the amounts which are charged to the
licensees who offer their bids in auction sales of vends are neither in the
nature of a tax nor in the nature of excise duty; and that, the true nature of
the charge which the Government levies in such cases is that it is a price
which the State charges as a consideration for parting with its privileges in
favour of the licensee. Such a charge is a normal incident of a trading or
business transaction.
What the State could itself do in the
exercise of its privilege, it authorizes another to do by charging a price for
parting with its privilege. A price can neither be a tax nor excise duty.
The High Court has recorded in its judgment a
concession said to have been made by the learned Advocate General on behalf of
the State of Haryana that "Rupees 17.60 is the still-head duty per proof
litre". In the application dated May 2, 1968 filed by the State Government
in the High Court for certificate to appeal to this Court, it was stated that
in the interest of justice it was necessary that the points involved in the
writ petition be decided by the Supreme Court since they affected "lacs of
rupees as excise duty". This makes it plausible that the concession was
made.
But considering the tenor of the arguments
advanced on behalf of the State Government in the High Court, it does not
appear likely that any concession was made by the Advocate General regarding
the nature of the charge. It is disputed before us that the Advocate General
made any such concession and indeed even in the Memorandum of Appeal which was
filed in this Court, it was stated specifically that the High Court was in
error in saying that the Advocate General had made the particular concession
and that, as a matter of fact, "it was vehemently argued by the Advocate
General that the auction was only in terms of money which was to represent the
amount of fee for the privilege of selling country liquor at a particular shop;
only the amount of money was to be calculated by multiplying the number of
proof litres bid by Rs. 17.60 p.". We might add that the 758 concession,
if any, made by the Advocate General in the High Court cannot affect the true
legal position that the amount which the respondents became liable to pay under
the terms of the auction is not excise or still-head duty but is a price which
the Government charged for parting with its privilege, during the currency of
the period covered by the contract.
On this consideration also, apart from the
validity of the preliminary objection, the respondents' writ petition is liable
to fail. The amount which the respondents agreed to pay to the State Government
under the terms of the auction is neither a fee properly so called which would
require the existence of a quid pro quo, nor indeed is the amount in the nature
of excise duty, which by reason of the constitutional constraints has to be
primarily a duty on the production or manufacture of goods produced or
manufactured within the country. The respondents cannot therefore complain that
they are being asked to pay "excise duty" or "still-head
duty" on quota of liquor not taken, lifted or purchased by them. The
respondents agreed to pay a certain sum under the terms of the auction and the
Rules only prescribe a convenient mode where by their liability was spread over
the entire year by splitting it up into fortnightly instalments. The Rules
might as well have provided for payment of a lump sum and the very issuance of
the licence could have been made to depend on the payment of such sum. If it
could not be argued in that event that the lump sum payment represented excise
duty, it cannot be so argued in the present event merely because the quota for
which the respondents gave their bid is required to be multiplied by a certain
figure per proof litre and further because the respondents were given the
facility of paying the amount by instalments while lifting the quota from time
to time. What the respondents agreed to pay was the price of a privilege which
the State parted with in their favour. They cannot therefore avoid their
liability by contending that the payment which they were called upon to make is
truly in the nature of excise duty and that no such duty can be imposed on
liquor not lifted or purchased by them.
In Panna Lal v. State of Rajasthan it was held
by this Court that the licence fee stipulated to be paid by the licensees was
the price or consideration or rental which the Government charged them for
parting with its privilege and that it was a normal incident of trading or
business transaction. It is true that the Court also said that no excise duty
could be collected on undrawn liquor but it held that while enforcing the
payment of the guaranteed sum or the stipulated sum mentioned in the licences,
the Government was not seeking to levy or recover exciseduty on undrawn liquor.
In the instant case too, what the Government is trying to recover from the
respondents is in essence the price of the privilege with which it has parted
in their favour and not excise duty on undrawn liquor.
Strong reliance was placed by the respondents
on the decisions of this Court in Bimal Chandra Banerjee v. State of Madhya
Pradesh, State of Madhya Pradesh v. Firm Gappulal etc. and Excise Commissioner,
U.P., Allahabad v. Ram Kumar in support of their contention that what they are
called upon to pay by the Government is excise duty. In Bimal Chandra Banerjee,
it was held by this Court that the levy of excise duty on undrawn liquor was
beyond the power of the State Government and that therefore the rule imposing
the condition to that effect was invalid. That decision was followed in the
Madhya Pradesh case where also, the licensees were required to pay what was
described as "Pratikar", which was nothing but excise duty on undrawn
liquor. The same situation obtained in the U.P. case because, the real nature
of the payment which the licensees were required to make there was excise duty
on undrawn liquor.
These decisions cannot help the respondents
because the true position, as stated earlier, is that the amount which the respondents
are called upon to pay is not excise duty on undrawn liquor but is the price of
a privilege for which they offered their bid at the auction of the vend which
they wanted to conduct.
Thus the respondents must fail in their
contention both on account of the objection to the maintainability of their
writ petition and on merits concerning the nature of the payment which they are
liable to make.
There is however one other point which cannot
be overlooked and on which the respondents may possibly have a plausible case.
It is urged by Shri Tirath Singh Munjral for the respondents that the
re-auction which was held on May 23, 1967 was not in accordance with the Rules
and therefore, the respondents cannot be called upon to pay the difference
between the amount which they had agreed to pay and the amount which was
fetched in the re-auction of the vend. In paragraph 14 of the writ petition, it
is averred that the respondents were never informed as to where and at what
time the resale of the vend would be held on May 23, that no notice of the
intended resale was given as required by Rule 36(3) of the Punjab Liquor
Licence Rules 760 1956, that in fact no other notice was published or affixed
at any conspicuous public place notifying the proposed resale nor indeed was
the resale announced even by the beat of drum. According to the respondents, no
wide publicity was given to the re-auction and even the residents of the
adjoining villages who would have been interested in offering bids were not
aware of the re-auction. All that happened on May 23, according to the
respondents, was that one Lal Chand, a leading licensee of Haryana, went to the
office of the Excise & Taxation Officer, Rohtak, and managed to have his
bid accepted. These irregularities it is contended, resulted in the startling
consequence that whereas in the auction held on March 27, 1967 the highest bid,
namely, of the respondents was for a quota of 62,100 litres equivalent to Rs.
10,92,960.00. in the re-auction held on May 23, 1967 the highest bid was only
for a quota of 15,000 proof litres equivalent to Rs. 2,46,400.00.
In the counter-affidavit dated August 16,
1967 filed by Shri Pritam Singh, Deputy Excise & Taxation Commissioner, the
allegations made in paragraph 14 of the writ petition are denied by saying that
the re-auction held on May 23, 1967 "was duly published in accordance with
rules".
The High Court has rejected the contention of
the respondents in this behalf. But it seems to us that its judgment on this
aspect of the matter suffers, with respect, from a misunderstanding of the
grievance of the respondents.
Their main grievance that due publicity was
not given to the re-auction, as a result of which proper bids were not
received, has been overlooked by the High Court and it merely dealt with the
question whether the respondents themselves had notice of the re-auction and
whether the date of the re-auction ought to have been fixed by the Financial
Commissioner himself and by no other person. The High Court is right that the
respondents did have notice of the re-auction, as is clear from the order dated
May 17, 1967 passed by the Deputy Excise & Taxation Commissioner,
Headquarters, Haryana, while cancelling the respondents' licence. It also
appears clear that the date of the re-auction need not be fixed by the
Financial Commissioner himself. But there is no discussion whatsoever in the
judgment of the High Court, on the question as to whether due publicity was
given to the re-auction as required by the Rules. In paragraph 14 of their
rejoinder-affidavit filed in the High Court on September 14, 1967, respondents
had stated that it was incorrect that the re-auction was duly published in
accordance with the Rules. Alongwith their rejoinder, respondents filed
affidavits of three Sarpanchas, three members of the Panchayats and a Lamberdar
to show that no notice whatsoever was given of 761 the re-auction to the people
in the vicinity of Biswan Meel village. The High Court has not even made a
reference to these affidavits, while dealing with the particular point (namely,
contention No. 2 before the High Court), which bears out what we have stated
above that it really misdirected itself' while examining the contention raised
by the respondents in regard to the absence of due publicity for the re-auction.
This makes it necessary to remand the matter
to the High Court in order to enable it to record its findings on two
outstanding questions: (1) whether it was necessary according to the Rules
which were in force at the relevant time to give adequate publicity to the re-auction
and, (2) if so, whether such publicity was in fact given to the re-auction. If
the officers of the State have defaulted in carrying out their obligation, if
any, in the matter of giving due publicity to the re-auction, the consequence
could be that the respondents may not be liable to pay the difference between
the amount which they were liable to pay and the amount realised in the re-auction.
In the result, except for the contention in
regard to the two questions mentioned in the preceding paragraph, the State
must succeed. We shall, however, have to await the findings of the High Court
on the two points mentioned above before passing the final order, which can
only be done after the findings of the High Court are received. We direct the
High Court to decide the aforesaid questions on the material as it stands on
the record and on such further material as the parties may desire to adduce.
The State, especially, may like to file a further affidavit in reply to the
rejoinder affidavit of the respondents along with which the affidavits of three
Sarpanchas, three members of certain Panchayats and of a Lamberdar were filed.
The High Court will certify its findings to this Court within three months from
to-day.
S.R. Appeal allowed in part.
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