1/7 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 09TH DAY OF OCTOBER 2017 BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI WRIT PETITION No.40825/2017 (EXCISE) BETWEEN:
M/S. MYSORE-INTERCONTINENTAL HOTELS PVT LTD., CORPORATE OFFICE: J.P. CORP No.219/11 4TH FLOOR, BELLARY ROAD SADASHIVANAGAR, BANGALORE-560 080 REP. BY ITS DIRECTOR SHRI. J.P. SUDHAKAR.
(BY SRI. B.N. SHETTY, ADV.,) AND:
1. THE COMMISSIONER OF EXCISE O/o. COMMISSIONER OF EXCISE 2ND FLOOR, TTMC “A” BLOCK BMTC COMPLEX, SHANTHI NAGAR BANGALORE-27.
2. THE DY. COMMISSIONER OF EXCISE BANGALORE URBAN DIST. (EAST) BANGALORE-560002.
…PETITIONER …RESPONDENTS (BY SRI. A.M. SURESH REDDY, AGA) THIS W.P. IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE IMPUGNED ENDORSEMENT DTD:16.8.2017 ISSUED BY THE R-2 (AS PER ANNEXURE-A) IS ILLEGAL AND UNENFORCEABLE IN LAW & ETC., THIS W.P. COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Mr. B.N. Shetty, Adv. for Petitioner Mr. A.M. Suresh Reddy, AGA for Respondents 1. The petitioner–M/s.Mysore-Intercontinental Hotels, a Private Limited Company enacted under the provisions of the Companies Act, 1956, has filed this writ petition aggrieved by the impugned Endorsement issued by the Respondent-Deputy Commissioner of Excise, Bangalore Urban District, (East), Bangalore, demanding Transfer Fee under Rule 17-B of the Karnataka Excise Licences (General Condition of Licence) Rules, 1967, while renewing the Excise licence CL-7 of the petitioner-company for the year 2016-17.
2. The said Transfer Fee was demanded on the ground that one of the Directors of the said Limited Company Mr.J.P.Narayana Swamy, had expired on 09.02.2017 and the said company inducted two new Directors on the Board of Directors, who were not the legal representatives of the deceased Director Mr.J.P.Narayana Swamy and therefore, the renewal of the Excise licence for the year 2016-17 with the photographs and names of these two new co-opted Directors amounted to “Transfer of the Excise Licence “ within the meaning of the Rule 17-B of the Rules and hence, the impugned Endorsement was issued.
3. Having heard the learned counsels for the parties, this Court is satisfied that the impugned Endorsement cannot be sustained and essentially because it is based on the fallacious premise taken by the Respondents-Department and not understanding of the basic concept of corporate law that all the Directors of the Limited Company are separate from the juristic person or the corporate body of the company itself. The Excise licencee in question is the corporate body or the limited company and not the Directors of the company. Therefore, after the death of one of the Directors in the present case, if two different persons were taken on the Board of the Directors of the said Company, who may or may not be the relatives of the deceased Director, the independent existence of the company continued in the same manner and the Excise licence in question could not be said to have been transferred to a different person or a different company at all.
4. This Court recently had an occasion to consider the case of Rule 17-B on Transfer of Licence in the case of the partnership firms, which even though, unlike the limited company, is not a juristic person but a composition of individual persons or even the juristic persons like a limited company being the partners therein and for change of constitution of such partnership firms, this Court had an occasion to interpret Rule 17-B of the Excise Rules and laid down the guidelines for the purpose of attracting the Transfer Fees in the case of partnership firms. During the course of that case, this Court observed as follows in paragraphs 6 to 9:-
“6. For the purposes of this Rule 17-B, the partnership firm even though it is not a separate juristic person like a limited company incorporated under the Companies Act, 1956 or new Companies Act, 2013, but the same is treated as a “person” for the purpose of Rule 17-B of Rules, 1967.
7. A perusal of the Proviso to Rule 17-B quoted above would indicate that the case of the partnership firm specifically dealt with in the said Proviso and in cases of Licence in the Form CL-7D (Hotel and Boarding House Licences) held by a person belonging to Scheduled Castes or the Scheduled Tribes category, the said Proviso stipulate that in the cases of partnership firm, all the partners shall belong to the Scheduled Castes or the Scheduled Tribes or in case of company registered under the Companies Act, 2013, all the Directors shall belong to Scheduled Castes or the Scheduled Tribes category.
8. However, the learned Counsels at the Bar had brought to the notice of the Court that this Court has already struck down the Special category of CL-7D Licences for the aforesaid categories of Hotels and Boarding House Licences to be given only to the reserved class of Scheduled Caste or the Scheduled Tribe persons in the case of B.Govindaraj Hegde Vs. State of Karnataka in W.P.No.19788/2015 disposed of on 22.07.2016 and that judgment has been upheld by a Division Bench of this Court in W.A.No.3374/2016 c/w W.A.Nos.3368/2016, 3211/2016, 4048/2016 and 4402/2016 disposed of on 20.01.2017 and by the Supreme Court in SLP(C) Nos.021377-021381/2017 disposed of on 11.08.2017.
9. There is no dispute from either side that the partnership firm as such can be treated as a ‘person’ for the purpose of Rule 17-B of Rules, 1967 and the change in the constitution of partnership firm would attract the provisions of Rule 17-B and the payment of transfer fee. But the question still remains as to what is the yardstick or line drawn for the purpose of treating a transfer by way of change of composition or constitution of the partnership firm and at what stage it would attract such payment of transfer fee”.
5. The case in hand before this Court is relating to a Private Limited Company. Definitely there is no “transfer” of Excise Licence within the meaning of Rule 17-B, when the composition of the Board of Directors of the Limited company changes, which is quite independent and separate from the body corporate itself. The question of levy of transfer fees in such cases will not arise. It may arise only if Excise Licence is transferred by one limited company to another limited company.
6. Therefore, the present petition deserves to be allowed and the same is accordingly allowed. The impugned Endorsement Annexure-A dated 16.08.2017 is quashed. No costs.
Sd/- JUDGE Srl.