IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8TH DAY OF JULY, 2019 BEFORE THE HON’BLE MRS.JUSTICE S.SUJATHA W.P.No.27849/2019 (EXCISE) BETWEEN :
SMT.SHASHIKALA W/O NARASIMHAMURTHY, AGED ABOUT 45 YEARS, NO.339, 7TH BLOCK, CL-9 LICENSEE, KORAMANGALA, BENGALURU-560034. ...PETITIONER (BY SRI G.K.BHAT, ADV.) AND :
1. THE STATE OF KARNATAKA REP BY ITS ADDITIONAL SECRETARY, FINANCE DEPARTMENT, VIDHANA SOUDHA, BENGALURU-560001.
2. THE EXCISE COMMISSIONER IN KARNATAKA 2ND FLOOR, TTMC "A" BLOCK, BMTC BUILDING, SHANTHINAGAR, BANGALORE-560 027.
3. THE DEPUTY COMMISSIONER BENGALURU URBAN DISTRICT, BENGALURU-560009.
4. THE DEPUTY COMMISSIONER OF EXCISE BENGALURU URBAN DISTRICT (SOUTH), MYSURU ROAD, BENGALURU-560092. …RESPONDENTS (BY SMT.M.JYOTHI, AGA.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED DEMAND NOTICE DATED 29/28.06.2019 AS PER ANNEXURE-F ISSUED BY THE R-4 AS THE SAME IS WITHOUT JURISDICTION.
THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R The petitioner has assailed the notice dated 28.6.2019 issued by the respondent No.4, Annexure-F to the writ petition inter alia seeking a direction to the respondent Nos.3 and 4 to consider the renewal of licence in Form CL-9 of the petitioner as per Annexure-N and for other consequential reliefs.
2. The petitioner is claiming to be a transferee of the licence in Form CL-9 which was originally standing in the name of M/s Hotel Rajmahal. The same has been transferred in favour of the petitioner by order dated 30.6.2016. Consequently, necessary endorsement has been made on the licence and the petitioner has been carrying on the license business during its validity. It is submitted that while the license was standing in the name of M/s.Hotel Rajmahal, a demand notice was issued by the respondent No.4 demanding a sum of Rs.56,59,900/- towards the fine amount for violation of Rule 14(2) of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules 1968 (‘Rules’ for short). Aggrieved by the same, the said licensee (M/s.Hotel Rajmahal) had preferred an appeal under Section 61(2) of the Karnataka Excise Act, 1965 (‘Act’ for short). The appeal came to be disposed of on 25.1.2017 setting aside the impugned demand notice and remitting the matter back to respondent No.4-Deputy Commissioner concerned to pass appropriate orders in accordance with law after affording an opportunity of hearing to the appellant M/s.Hotel Rajmahal and look into the contentions raised by the learned counsel for the appellant.
3. Being aggrieved by the same, M/s. Hotel Rajmahal had preferred an appeal before the Karnataka Appellate Tribunal (‘KAT’ for short) at Bangalore in Appeal No.235/2017. It is submitted that the KAT has not passed any interim order. Now the matter is reserved for orders. During the pendency of the appeal proceedings before the Tribunal, the licence has been transferred in the name of the petitioner herein.
4. It is the grievance of the petitioner that when the matter is now seized of by the Tribunal, respondent No.4 has issued the notice dated 29.6.2019 impugned herein calling upon the petitioner to pay the balance amount of Rs.25,59,900/- on or before 30.6.2019.
5. Learned counsel Sri.G.K.Bhat appearing for the petitioner would submit that notice at Annexure-F issued by the respondent No.4 is without jurisdiction and lacks competence. Hence, on this ground alone, the said notice requires to be set aside. It is further argued that no opportunity of hearing was provided to the petitioner before demanding the huge arrears of Rs.25,59,900/-. Renewal of licence starts from one month prior to the expiry of the licence. However, the respondent No.4 has issued the impugned notice just two days prior to the closure of the excise year when the renewal of licence has to be considered for the excise year 2019-20 with effect from 1.7.2019. Learned counsel in support of his submissions placed reliance on the following judgments:
1. M/s Siddi Enterprises & others Vs. The State of Karnataka in W.P.Nos.24691-709/2011 (D.D.19.7.2011).
2. M/s High Point Hotels Pvt. Ltd., Vs. The Excise Commissioner in Karnataka in W.P.No.27575/2017 & allied matters (D.D.18.8.2017).
6. Reliance is also placed on the Notification dated 17.4.1998 issued by the Government of Karnataka exercising the powers under sub-section(2) of Section 17 of the Excise Act, 1965.
7. Learned AGA appearing for the respondents has filed the statement of objections. It is submitted that the erstwhile licensee M/s Hotel Rajmahal as well as the transferee of the licensee had given an undertaking before the excise authorities while granting renewal of license for the excise year 2017-18 that they will discharge the balance arrears towards short lifting of liquor in terms of Rule 14(2) of the Rules to the extent of Rs.26,59,900/- within a period of 2 to 3 months as far back as on 28.8.2017. The total demand of Rs.56,59,900/- towards the fine amount under the Rules for the period April 2003 to July 2014 was quantified after providing an opportunity of hearing to the original licensee-transferor. The same having been accepted, Rs.30 lakhs was paid by the transferor towards the arrears and the balance of Rs.26,59,900/- remains to be paid. The petitioner having undertaken to make the payment of the said arrears towards the short lifting of liquor, now cannot turn around and challenge the impugned notice on the ground of jurisdiction/competency. It was argued that the petitioner cannot rush to this Court without availing alternative remedy of statutory appeal available under the Act. Reliance is placed on the order of this Court in the case of Mr.B.Y.Ramachandra Vs. The State of Karnataka & others in W.P.No.24851/2015 (D.D.2.7.2015) and Lakshmi Bar and Restaurant Vs. State of Karnataka and others reported in 2017(4) KLJ 484.
8. I have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.
9. It is well settled law that there is no absolute bar to invoke the writ jurisdiction when the question of competency/jurisdiction of the authorities issuing the impugned notification is the epicenter of dispute. It is apt to refer to the Notification FD 4 PES 98(III) dated 17.4.1998 issued by the Government of Karnataka exercising the powers conferred under sub-section(2) of Section 17 of the Karnataka Excise Act, 1965. The relevant portion reads thus:
“ In exercise of the powers conferred by sub- Section(2) of Section 7 of the Karnataka Excise Act, 1965 (Karnataka Act 21 of 1966) (hereinafter referred to as the said Act) the Government of Karnataka hereby direct, with immediate effect, that the Deputy Commissioner of Excise appointed under sub- Section(1) of Section 4-A of the said Act shall:-
(ii) exercise all other powers and perform all other duties and functions assigned to the Deputy Commissioner by or under the Act, except disposal of the right of retail vend of liquors under the Karnataka Excise (Lease of the Right of Retail Vend of Liquors) Rules, 1969 and grant of excise licence under any Rules under the said Act (other than grant of arrack shop licence under clause (i) above, subject to the overall supervision and administrative control of the Deputy Commissioner.”
10. From the reading of this Notification, it indicates that the Deputy Commissioner of Excise appointed under sub-section (1) of Section 4-A of the Act is empowered to exercise all other powers and perform all other duties and functions assigned to the Deputy Commissioner by or under the Act, except disposal of the right of retail vend of liquors under the Karnataka Excise (Lease of the Right of Retail Vend of Liquors) Rules, 1969 and grant of excise licence under any Rules under the said Act (other than grant of arrack shop licence under clause(i). The power relating to fine as regards short lifting of liquor under Rule 14(2) of the Rules is not excluded from the powers delegated to the Deputy Commissioner of Excise. The question involved in this writ petition revolves around the short lifting of liquor under Rule 14(2) of the Rules.
11. The cognate Bench of this Court in the case of M/s. High Point Hotels Pvt. Ltd., supra, has categorically observed that Rule 14(2) of the Rules which was inserted on the Statute Book with effect from 01.04.2003 was omitted with effect from 01.08.2014 and the demand of the said Penalty which has been held to be in the nature of fiscal liability is only for the different periods. It is further observed that the decision of the Constitution Bench in the case of M/s Rayala Corporation (P) Limited and Kolhapur Casesugar Works Limited is of little assistance to the licensee inasmuch as the action taken against them with regard to Rule 14(2) of the Rules for a period prior to its omission on 01.08.2014. It is held that the said demand of penalty/fiscal liability cannot be struck down on the basis of the aforesaid contention raised by the learned counsel for the petitioner. It is further observed that the said fiscal liability in the name of penalty under Rule 14(2) of the Rules is actually the price or the liquidated damages to be paid by the Excise Licensees of vendors of liquor for the breach of contract on their part for short lifting of the prescribed quantity of liquor from the State Beverage Corporation. Hence, there is no need to go into the question of mens rea or opportunity of hearing or raising an objection in that regard.
12. In the light of the said judgment, it cannot be held that the action of the respondent No.4 in demanding the arrears of penalty relating to Rule 14(2) of the Rules is unjustifiable. Moreover, as aforesaid, in terms of the Notification dated 17.4.1998, the power is delegated to respondent No.4 to perform all duties and functions assigned to the Deputy Commissioner in this regard. Reliance placed on the judgment of this Court in the case of B.Y.Ramachandra, supra, though does not indicate the nature of the notice challenged therein, the letter addressed by the Law Officer regarding the said case placed on record by the learned AGA would reflect that the said notice was issued by the Deputy Commissioner under Rule 14(2) of the Rules which was not in conformity with the Notification dated 17.4.1998.
13. In the case of M/s Siddi Enterprises, supra, the Hon’ble Court has examined the second proviso to Rule 14(2) in the context of the jurisdiction of the Licensing Authority. However, the Notification dated 17.4.1998 was not the subject matter of the said decision to decide the jurisdiction of the Officer concerned.
14. In the case of Lakshmi Bar and Restaurant, supra, this court has declined to entertain the petition on the alleged breach of principles of natural justice dealing with Rule 14(2) of the Rules.
15. In view of the aforesaid, this Court is of the considered opinion that the respondent No.4 has the competency and jurisdiction to issue the notice impugned herein. Further providing an opportunity of hearing to the petitioner would not be reasonable as held in Lakshmi Bar and Restaurant, supra.
Hence, the writ petition is dismissed as devoid of merits.
Sd/- JUDGE Dvr: