IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF DECEMBER, 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.27341/2019 (EXCISE) BETWEEN:
M/s. SANNIDHI ENTERPRISES HAVING ITS PLACE OF BUSINESS AT:
No.340, MARUTHI PLAZA 1ST ‘B’ MAIN ROAD, 7TH BLOCK KORAMANGALA, BANGALORE-560095 REP. BY ITS MANAGING PARTNER Mr. DINESH SHETTY. …PETITIONER (BY SRI BHARATH KUMAR.V., ADV.) AND:
1. STATE OF KARNATAKA THROUGH PRINCIPAL SECRETARY FINANCE DEPARTMENT GOVERNMENT OF KARNATAKA VIKASA SOUDHA, AMBEDKAR VEEDHI BENGALURU-560001.
2. DEPUTY COMMISSIONER, EXCISE BENGALURU [SOUTH] ABHAKARI BHAVAN BYATARAYANAPURA BENGALURU-560092. …RESPONDENTS (BY SMT/Ms.NILOUFER AKBAR, AGA.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER DATED 18.06.2019 PASSED BY THE RESPONDENT No.2 HEREIN, WHEREIN THE RESPONDENT No.2 HEREIN PURPORTEDLY ACTING UNDER RULE 17-B OF THE KARNATAKA EXCISE LICENSES [GENERAL CONDITIONS] RULES 1967 [VIDE ANNEXURE-A] AND ETC., THIS PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R Though the matter is listed for Orders, with the consent of learned counsel appearing for the parties, the matter is taken up for final disposal.
2. The petitioner has challenged the order dated 18.06.2019 passed by the respondent No.2 whereby the petitioner has been directed to make the arrears of Rs.5,22,750/- balance/deficit towards the transfer of licence fee under Rule 17-B of the Karnataka Excise Licenses [General Conditions] Rules, 1967 [‘Rules 1967’ for short].
3. The petitioner claims to be a partnership concern and a sanadh holder of an excise License, Category CL-9, operating a bar and restaurant. It is submitted that at present, the petitioner concern consists of two partners i.e., Mr. Dinesh B. Shetty and Mr. Shankar Srinivas. Prior to the period 01.01.2013, the said firm consisted of four partners i.e., Mr.Ashok Hegde, Mr.Mohan M. Shetty, Mr.Subhash N. Shetty and Mr. Praveen V. Shetty; subsequently, the petitioner firm vide agreement dated 01.01.2013, is re-constituted the firm In order to effect such changes in the partnership firm, had submitted an application dated 15.02.2013 before the respondent authorities in accordance with Rule 17-B of the Rules as it existed along with payment i.e., equivalent to the annual licence specified in Rule 8 of the Karnataka Excise [Sale of Indian and Foreign Liquors] Rules, 1968 [‘Rules 1968’ for short] and Rule 5 of the Karnataka Excise [Lease of Right of Retail Vend of Bee] Rules, 1976 [‘Rules 1976’ for short], totally amounting to Rs.6,90,000/- and Rs.17,250/- respectively.
4. It is submitted that the said application was forwarded to the Excise Commissioner, Karnataka for approval in terms of the Rule 17-B of the Rules 1967 on 15.02.2013 and the same was approved by the Excise Commissioner vide communication dated 28.02.2013. On the strength of the said approval of the Commissioner dated 28.02.2013, the respondent No.2 herein had passed the orders dated 01.03.2013 effecting the change of the constitution of the petitioner firm – M/s. Sannidhi Enterprises. In the meanwhile, on 01.03.2013, Rule 17-B of Rules, 1967 was amended whereby the fees under Rule 17-B was made twice the amount as it stood prior to 01.03.2013.
5. In view of such amendment to Rule 17-B of the Rules, 1967, the respondent No.2 after lapse of six years, has issued the demand notice calling upon the petitioner to pay deficit fee of Rs.5,22,750/- on or before 24.06.2019. Hence, the present petition.
6. Learned counsel for the petitioner would submit that the application was submitted on 15.02.2013 much prior to the draft Rules published in the Karnataka Gazette on 28.02.2013, inviting the objections and suggestions from all persons likely to be affected thereby within seven days from the date of its publication and the gazette was made available to the public on that very day. If that to be construed, the application submitted being well before the publication of the draft Rules in the Karnataka gazette, the Rules which were in force on the date of filing of the application has to be applied, not the amended Rules which has come into effect from 01.03.2013. The respondent No.2 has raised the demand towards the deficit fees under Rule 17-B of the Rules, placing reliance on the amended Rule 17-B which has come into effect on 01.03.2013, the day on which the application of the petitioner was allowed, permitting the re-
constitution of Firm. Hence, the demand dated 18.06.2019 made by the respondent No.2 is arbitrary and unjustifiable.
7. Learned Additional Government Advocate appearing for the Revenue justifying the impugned communication/demand dated 18.06.2019 would submit that the petitioner had given an undertaking before the respondent-Authorities to make any deficit/balance payment to the Revenue. The said transfer of licence CL-9 was made subject to the undertaking given by the petitioner that the petitioner shall be liable to make the deficit fees, if any. Learned Additional Government Advocate placing reliance on the decision of the Cognate Bench of this Court in W.P.Nos.23735/2013 and Connected Matters, submitted that the consideration of application of CL-9 licence should be only with reference to the Rules/law prevailing or in force on the date of consideration of the application by the Excise Authorities, with reference to the law and not as on the date of the application.
8. I have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.
9. The undisputed facts are that the application was submitted by the petitioner on 15.02.2013 for transfer of CL-9 licence along with prevailing fees of Rs.6,90,000/- plus Rs.17,250/- prescribed under Rule 17-B of the Rules, 1967 as on the date of filing of the application. The same was approved by the Excise Commissioner on 28.02.2013. In the meantime, draft Rules were published to amend Rule 17-B of the Rules, 1967 in the Karnataka Gazette on 20.02.2013 inviting the objections and suggestions likely to be affected thereby within seven days from the date of its publication and was made available to the public on that very day, wherein it was made clear that the amended Rule would come into effect on 01.03.2013. The Government of Karnataka, effected amendment to Rule 17-B increasing the fees to twice the annual fee by Notification dated 28.02.2013. The order of transfer of CL-9 licence was passed by the respondent No.2 on 01.03.2013. Notice to recover the deficit amount was issued during May, 2019 and order impugned is dated 18.06.2019.
10. In the facts and circumstances as aforesaid, the point that arises for consideration before this Court is, Whether the amended Rule 17-B of the Rules, 1967 substituting the words “subject to payment of transfer fee, equivalent to twice the annual license fee with effect from 01.03.2013” would be applicable to the present set of facts when the application was submitted by the petitioner on 15.02.2013, much prior to the publication of the draft Rules notifying that the amended Rule would come into effect from 01.03.2013 and the same was approved by the Excise Commissioner on 28.02.2013?
11. Much emphasis is placed by the learned Additional Government Advocate on the decision of the Cognate Bench of this Court in W.P.No.23735/2013 and Connected Matters to contend that the amended Rule 17-B is applicable to the facts of the present case. The factual matrix of the matter considered by the Cognate Bench of this Court as narrated in paragraph 2 of the said decision reveals that the petitioners therein had applied for transfer of licence fee on 02.03.2013 and 28.02.2013 by remitting the fees as per the then prevailing Rules. Considering the said aspect vis-à-vis the publication of draft Rules on 20.02.2013 wherein it was made clear that the amended Rule would come into effect on 01.03.2013, the Cognate Bench of this Court has held that the date of consideration of the application by the authorities would be relevant and the Rules as they existed on the date of application cannot be sustained. It is obvious that on publication of the draft Rules in the Karnataka Gazette on 20.02.2013 making it available to the public that the amended Rule would come into effect from 01.03.2013, increasing the fees for transfer, the applications filed for transfer of licence before the Act coming into force could be construed as falling under the arena of the amended Rules. However, in the present case, the application was filed on 15.02.2013 much earlier to draft Rules published in the Karnataka Gazette on 20.02.2013. At any stretch of imagination, it cannot be construed that the petitioner was aware of the Rules to be amended with effect from 01.03.2013 inasmuch as enhancing the transfer fee equivalent to twice the annual licence fee.
12. In the case of State of Kerala and Another V/s. B. Six Holiday Resorts Private Limited and Others reported in [2010] 5 SCC 186, the material facts were that an application was made for FL-3 licence under the Foreign Liquor Rules framed under Abkari Act and the same having not been considered, the applicant filed a writ petition and the same was disposed of with a direction to the Excise Authorities to consider and dispose of the application within three weeks. Pursuant to the directions of the Hon’ble Court, the said application was considered and the same came to be rejected. During the pendency of the matter before the Excise Authorities, the Rules were amended by way of substitution. The applicant therein challenged the amendment to the Rule and the consequential rejection of the application relying on the amended Rule. The Hon’ble High Court held that the application ought to have been considered with reference to the Rules existing on the date of application and not on the date of consideration of the application.
13. On further challenge before the Hon’ble Apex Court, it was held that the consideration of application of FL-3 licence should be only with reference to the Rules/law prevailing or in force on the date of consideration, having regard to the fact that the State has exclusive privilege of manufacture and sale of liquor, and no citizen has a fundamental right to carry on trade or business in liquor. The said application was made by the applicant for FL-3 licence which necessarily requires verification, inspection and processing, seeking FL-3 licence not being a vested right with the applicant, the Hon’ble Apex Court has held that the view of the Hon’ble High Court that the application for licence should be considered with reference to the Rules as they existed on the date of application cannot be sustained.
14. But however in the present case, it is not granting of a fresh CL-9 licence to the petitioner. It is the transfer of licence under Rule 17-B of the Rules, 1967. Rule 17-B of the Rules, 1967 as it stood on the date of filing of the application dated 15.02.2013 contemplates that the Deputy Commissioner may on an application by the licensee and subject to payment of transfer fee equivalent to the annual licence fee specified in Rule 8 of the Rule 8 of the Karnataka Excise [Sale of Indian and Foreign Liquors] Rules, 1968 or Rule 5 of the Karnataka Excise [Lease of Right of Retail Vend of Bee] Rules, 1976, as the case may be, and with the prior approval of the Excise Commissioner, transfer such licence in favour of any person named by such licencee, if such person is eligible for grant of a licence under the Karnataka Excise Act, 1965 or the Rules made thereunder.
15. It is trite that the manner in which the decision was taken and the time frame taken by the Competent Authority to dispose of the application are all beyond the control of the assessee. Thus, a holistic interpretation if to be made, the attendant circumstances as to how the petitioner was treated by the authorities assume importance. The payment of transfer fee regarding the transfer of licence differs from the issue of licence in law.
16. Thus, due to lackadaisical attitude of the authorities, if no orders passed, despite the approval of the Excise Commissioner well before the amendment Act coming into force and due to such attitude of the authorities, if the amendment Act has to be applied, the petitioner has to suffer for no fault of his own.
17. For the reasons aforesaid, the matter requires to be re-considered by the respondent No.2. Hence, the Annexure-A dated 18.06.2019 is quashed and the matter is restored to the file of the respondent No.2 to re-consider the matter in the light of the observations made herein above, after providing an opportunity of hearing to the petitioner in an expedite manner in any event not later than four weeks from the date of receipt of certified copy of the order.
Writ petition stands disposed of in terms of the above.
Sd/- JUDGE NC.