Madras High Court
The Commissioner Of Prohibition vs United Spirits Limited on 5 November, 2014
Author: M. Sathyanarayanan
Bench: Sanjay Kishan Kaul, M.Sathyanarayanan
In the High Court of Judicature at Madras Dated: 05.11.2014 Coram: The Honourable Mr. SANJAY KISHAN KAUL, Chief Justice and The Honourable Mr. Justice M.SATHYANARAYANAN Writ Appeal Nos. 963 to 965 of 2009 The Government of Tamil Nadu rep. by its Secretary to Government Home, Prohibition and Excise Dept. Fort St. George, Chennai 9. The Commissioner of Prohibition and Excise .. Appellants 1 & 2 in Chepauk, Chennai 5. all appeals The Excise Supervisory Officer Balaji Distilleries Limited Bye-Pass Road .. 3rd Appellant in W.A. Poonamallee, Chennai 600 056 Nos. 963 & 964/2009 The Excise Supervisory Officer Empee Distilleries Limited Mevaloorkuppam Sriperumbudhur Taluk .. 3rd Appellant in Anna District. W.A. No.965/2009 vs. United Spirits Limited rep. by its Executive Vice President (Distilleries and Breweries) Mr. R.Raghuram having its Corporate Office .. Respondent in W.A. at No.9, Basullah Road, Chennai 17. Nos. 963 & 964/2009 .. Name of the respondent substituted vide order dated 15.10.2014 made in Memo SR. Nos. 8724 & 8725, dated 15.10.2014. Empee Distilleries Limited rep. by its Managing Director Mr. M. Purushothaman having its Corporate Office .. Respondent at No.695, Anna Salai, Chennai 6. in W.A.No. 965/2009 --- PRAYER: Writ Appeals filed under Clause 15 of the Letters Patent, against the Common Order dated 16.12.2006 passed by the learned Single Judge, in Writ Petition Nos. 24 and 52 of 1995 and 2324 of 1997 respectively on the file of this Court. --- For Appellants : Mr. A.L. Somayaji, Advocate General assisted by Mr. S.T.S. Moorthy, Government Pleader. For Respondent : Mr. M. Ravindran, Sr. Counsel for Mr. Krishna Ravindran --- COMMON JUDGMENT
(Made by The Hon'ble The Chief Justice) The State of Tamil Nadu, the original respondent, in exercise of the powers conferred by Section 54 of the Tamil Nadu Prohibition Act, 1937, sought to make an amendment to the Tamil Nadu Indian-made Foreign Spirits (Manufacture) Rules, 1981, (hereinafter referred as 'the Rules') vide a Notification dated 29.6.1990. In terms of the said amendment, it has to come into effect retrospectively with effect from 01.02.1988. Sub-rule (3) of Rule 15-A of the said Rules was substituted as under:
(3)(a) An allowance of not more than three per cent per batch shall be allowed for loss in the entire process of distillation of rectified spirit, re-distillation of impure spirit and handling loss;
Provided that the spent feints flowing out of rectified basement shall be practically free from alcohol.
(b) If the loss in the entire process exceeds the norms prescribed in clause (a) of this sub-rule, the Commissioner shall levy a penalty of Rupees sixteen per proof liter on such excess loss.
(c) No allowance shall be given for further loss in the reprocess of purification of impure spirit by re-distillation or mixing it with the next batch of rectified spirit.
2. The affected parties, being the private respondents before us, filed writ petitions assailing this notification, seeking a declaration that G.O.Ms.No.762, Home, Prohibition and Excise (III) Department, dated 29.6.1990, was unconstitutional and void, with a consequential relief being prayed for to quash the demand raised by the original third respondent (Excise Supervisory Officer).
3. The learned single Judge, in terms of a common impugned order passed in four writ petitions, has agreed with the plea of the original petitioners concluding that the amended provision, being in the nature of penal clause could not have retrospective effect on account of Article 20 of the Constitution of India. The second ground on which G.O.Ms.No.762, dated 29.6.1990 has been quashed is that the same has been passed without hearing the affected parties, while the third ground is that the impugned demand notices were issued without any basis, without any worksheet and without an iota of evidence.
4. The State Government has, thus, assailed the finding in the present appeals.
5. The first and foremost question which arises for consideration is the validity of the G.O.Ms.No.762, dated 29.6.1990, challenged on the basis of Article 20 of the Constitution of India. Article 20 reads as under:
20. Protection in respect of conviction for offences.
(1) No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the Act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
(2) No person shall be prosecuted and punished for the same offence more than once.
(3) No person accused of any offence shall be compelled to be a witness against himself.
6. Learned Advocate General has relied upon four judicial pronouncements to canvass his case before us that such retrospectivity is permissible, as it is in the nature of a fiscal demand and not arising from conviction of an affected party under criminal law. The judgments with the relevant passages relied upon are as under:
(i) Shiv Dutt Rai Fateh Chand and others v. Union of India and another [(1983) 3 SCC 529]:-
25. The contention of the petitioners is that any act or omission which is considered to be a default under the Act for which penalty is leviable is an offence, that such act or, omission was not an offence and no penalty was payable under the law in force at the time when it was committed and hence they cannot be punished by the levy of penalty under a law which is given retrospective effect. They principally rely on Article 20 (1) in support of their case. Article 20 (1) is modelled on the basis of Section 9 (3) of Article 1 of the Constitution of the United States of America which reads: "No bill of attainder or ex post facto law shall be passed". This clause has been understood in the United States of America as being applicable only to legislation concerning crimes. (See Calder v. Bull, (1798) 3 Dall 386). The expression 'offence' is not defined in the Constitution. Article 367 of the Constitution says that unless the context otherwise provides for words which are not defined in the Constitution, the meaning assigned in the General Clauses Act, 1897 may be given. Section 3 (38) of the General Clauses Act defines 'offence' as any act or omission made punishable by any law for the time being in force. The marginal note of out Article 20 is 'Protection in respect of conviction for offences'. The presence of the words 'conviction' and 'offences', in the marginal note 'convicted of an offence', 'the act charged as an offence' and 'commission of offence' in Clause (1) of Article 20, Prosecuted and punished' in Clause (2) of Article 2 and 'accused of an offence' and 'compelled to be a witness against himself' in Clause (3) of Article 20 clearly suggests that Article 20 relates to the constitutional protection given to persons who are charged with a crime before a Criminal Court. (See H. M. Seervai: Constitutional Law of India (3rd Edition) Vol., 1, page 759). The word 'penalty' is a word of wide significance. Sometimes it means recovery of an amount as a penal measure even in a civil proceeding. An exaction which is not of compensatory character is also termed as a penalty even though it is not being recovered pursuant to an order finding the person concerned guilty of a crime. In Article 20 (1) the expression 'penalty' is used in the narrow sense as meaning a payment which has to be made or a deprivation of liberty which has to be suffered as a consequence of a finding that the person accused of a crime is guilty of the charge.
26. In Maqbool Hussain v. State of Bombay, 1953 SCR 730, the question for consideration was whether when the customs authorities confiscated certain goods under the Sea Customs Act there was a prosecution and the order of confiscation constituted a punishment within the meaning of Clause (2) of Article 20. Negativing the said plea, this Court observed at pages 738, 739 (of SCR):
"The very wording of Article 20 and the words used therein :- "convicted" "commission of the act charged as an offence", "be subjected to a penalty", "commission of the offence", "prosecuted and punished", "accused of any offence", would indicate that the proceedings therein contemplated are of the nature of criminal proceedings, before a Court of law or a judicial tribunal and the prosecution in this context would mean an initiation or starting of proceedings of a criminal nature before a Court of law or a judicial tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulates the procedure."
27. The levy of charges, for 'unauthorised use' of water enforced with retrospective effect was held to be not offending Article 20 (1) in Jawala Ram v. State of Pepsu, (1962) 2 SCR 503. Similarly in State of West Bengal v. S. K. Ghosh, (1963) 2 SCR III the forfeiture provided under S. 13 (3) of the Criminal Law Amendment Ordinance 1944 (38 of 1944) was held to be not a penalty within the meaning of Article 20 (1) of the Constitution and in that connection this Court observed at pages 130-131 (of SCR) thus : -
"Article 20 (1) deals with conviction of persons for offences and for subjection of them to penalties. It provides firstly that "no person shall be convicted of any offence except for violation of a law in force at the time of commission of the act charged as an offence", Secondly, it provides that no person shall be "subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence". Clearly. therefore. Article 20 is dealing with punishment for offences and provides two safeguards namely, (i) that no one shall be punished for an act which was not an offence under the law in force when it was committed, and (ii) that no one shall be subjected to a greater penalty for an offence than what was provided under the law in force when the offence was committed. The provision for forfeiture under Section 13(3) has nothing to do with the infliction of any penalty on any person for an offence. If the forfeiture provided in Section 13 (3) were really a penalty on a convicted person for commission of an offence we should have found it provided in the 1943. Ordinance and that penalty of forfeiture would have been inflicted by the Criminal Court trying the offender."
28. Again while upholding S. 25-FFF(1) (which came into force on June 6, 1957) of the Industrial Disputes Act, 1947 which directed compensation to workers who had been retrenched earlier on and after November 28, 1956, this Court observed in Hatisingh Mfg. Co. Ltd. v. Union of India, (1960) 3 SCR 528 at pp. 536 and 545 thus:-
"A law which creates a civil liability in respect of a transaction which has taken place before the date on which the Act was enacted does not per se impose an unreasonable restriction .................... ....(p. 536).
If the statute fixes criminal liability for contravention of the prohibition or the command which is made applicable to transactions which have taken place before the date of its enactment the protection of Article 20 (1) may be attracted ... ... ... By Section 33 (c) liability to pay compensation may be enforced by coercive process, but that again does not amount to infringement of Article 20 (1) of the Constitution. Undoubtedly for failure to discharge liability to pay compensation, a person may be imprisoned, under Supreme Today With All High Courts Page 13 of 17 the statute providing for recovery of the amount, e. g., the Bombay Land Revenue Code, but failure to discharge a civil liability is not unless the statute expressly so provides, an offence. The protection of Article, 20 (1) avails only against punishment for an act which in treated as an offence which when done was not an offence," (page 545).
29. The petitioners have relied upon certain decisions in support of their contention. We shall deal with some of them. It is true that in Hurdut Roy Moti Lall Jute Mills v. State of Bihar, (1956) 7 STC 609 the High Court of Patna held that the amendment of Section 14-A of the Bihar Sales Tax Act, 1947 by Bihar Act IV of 1955 in so far as it authorised the imposition of the penalty of forfeiture of the amounts collected earlier by dealers in contravention of the provisions of S. 14-A, without prejudice to any punishment for an offence under that Act, was violative of Article 20 (1) of the Constitution. We have gone through that decision. We do not find any tenable reason given by the High Court in support of its view. It may be added here that in the appeal filed against the decision before this Court in State of Bihar v. Rai Bahadur Hurdut Roy Moti Lall Jute Mills, AIR 1960 SC 378, the judgment of the High Court was confirmed on the ground that the penalty of forfeiture was not impossible on the facts of that case, but on the question of the applicability of Article 20 (1) to the case, this Court declined to express any opinion on the ground that it was purely an academic issue. In Shew Bhagwan Goenka v. Commercial Tax Officer, (1973) 32 STC 368 the Calcutta High Court observed that the retrospective operation of an amendment to the Bengal Finance (Sales Tax) Act, 1941, which imposed An unexpected liability in respect of certain transactions which when they took place were not subject to any charge or liability under that Act was opposed to Article 20 (1) of the Constitution. In that case the facts were that as a result of the modification of the definition of the word 'business' with retrospective effect, the assessee became liable to pay tax on the turnover relating to sales of certain old and discarded machineries and equipments. The assessee had not been prosecuted for any offence or punished by any Criminal Court as a consequence of such amendment. It was open to the High Court to hold that if there was any such prosecution for any offence it was violative of Article 20 (1). But in so far as realisation of tax was concerned Article 20 (1) did not in terms apply. Reference to Article 20 (1) was, therefore, unnecessary for deciding that case. The observations made by this Court in Commr. of Wealth Tax, Amritsar v. Suresh Seth, (1981) 3 SCR 419 at p. 430 to the effect :
"In the case of acts amounting to crimes the punishment to be imposed cannot be enhanced at all under our Constitution by any subsequent legislation by reason of Article 20 (1) of the Constitution which declares that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at 'the time of the commission of the offence. In other cases, however, even though the liability may be enhanced it can only be done by a subsequent law (of course subject to the Constitution) which either by express words or by necessary implication provides for such enhancement."
are obviously of no assistance to the petitioners.
30. On the other hand, a Full Bench of the High Court of Allahabad has held in Raghunandan Prasad Mohan Lal v. Income. tax Appellate Tribunal, Delhi Bench, (1970) 75 ITR 741 that Article 20 of the Constitution contemplates proceedings in the nature of criminal proceedings and it does not apply to penalty proceedings under the Income-tax Act. 1961 which have a civil sanction and are revenue in nature. The High Court of Madhya Pradesh has held in Central India Motors v. C. L. Sharma, (1980) 46 STC 379 that Article 20 (1) is not attracted to the case of a levy of penalty made with retrospective effect under the Madhya Pradesh General Sales Tax Act, 1958.
31. After giving an anxious consideration to the points urged before us, we feel that the word 'penalty' used in Art. 20 (1) cannot be construed as including a 'penalty' levied under the Sales Tax laws by the departmental authorities for violation of statutory provisions. A penalty imposed by the Sales Tax authorities is only a civil liability, though penal in character. It may be relevant to notice that sub-section (2-A) of Section 9 of the Act specifically refers to certain acts and omissions which are offences for which a criminal prosecution would lie and the provisions relating to offences have not been given Supreme Today With All High Courts Page 14 of 17 retrospective effect by Section 9 of the Amending Act. The argument based on Article 20(1) of the Constitution is, therefore, rejected.
32. The next point to be considered is whether the imposition and collection of penalty with retrospective effect amounts to an imposition of an unreasonable restriction on the fundamental right of the petitioners to own property and to carry on business guaranteed under. Article 19 (1) (f) and (g) of the Constitution. We have already indicated above the circumstances under which it became necessary to levy penalties with retrospective effect and to validate all the proceedings relating to levy of penalties and recovery thereof. The scope of the power of a legislature to make a law validating the levy of a tax or a duty retrospectively was considered by this Court in Chhotabhai Jethabhai Patel And Co. v. Union of India, (1962) Supp 2 SCR 1. The Court held that Parliament acting within its legislative field had the power and could by law both prospectively and retrospectively levy excise duty under the Central Excises and Salt Act, 1944 even where it was established that by reason of the retrospective effect being given to the law, the assessess were incapable of passing on the excise duty to the buyers. After considering certain American decisions. Ayyangar J. observed at page 37 (of SCR) thus:
"It would thus be seen that even under the Constitution of the United States of America the unconstitutionality of a retrospective tax is rested on what has been termed "the vague contours of the 5th Amendment." Whereas under the Indian Constitution that grounds on which infraction of the rights to property is to be tested not by the flexible rule of "due process" but on the more precise criteria set out in Article 19 (5). Mere retrospectively in the imposition of the tax cannot per se render the Law unconstitutional on the ground of its infringing the right to hold property under Article 19 (1) (f) or depriving the person of property under Art. 31(1). If on the one hand, the tax enactment in question were beyond legislative competence of the Union or a State necessarily different considerations arise. Such unauthorised imposition would undoubtedly not be a reasonable restriction on the right to hold property besides being an unreasonable restraint on the carrying on of business, if the tax in question is one which is laid on a person in respect of his business activity."
(ii) Director of Enforcement v. M.C.T.M. Corporation Private Limited and others [(1996) 2 SCC 471]:
8. It is thus the breach of a "civil obligation" which attracts "penalty" under Section 23 (1)(a) FERA, 1947 and a finding that the delinquent has contravened the provisions of Section 10 FERA, 1947 would immediately attract the levy of penalty under Section 23, irrespective of the fact whether the contravention was made by the defaulter with any "guilty intention" or not. Therefore, unlike in a criminal case, where it is essential for the "prosecution" to establish that the "accused" had the necessary guilty intention or in other words the requisite mens-rea to commit the alleged offence with which he is charged before recording his conviction, the obligation on the part of the Directorate of Enforcement, in cases of Contravention of the provisions of Section 10 of FERA, would be discharged where it is shown that the blameworthy conduct of the delinquent had been established by wilful contravention by him of the provision of Section 10, FERA, 1947. It is the delinquency of the defaulter itself which establishes his "blameworthy" conduct, attracting the provisions of Section 23(1)(a) of FERA, 1947 without any further proof of the existence of "mens-rea". Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and punished for the commission of an offence under the penal law, where the act of the defaulter also amounts to an offence under the penal law and the bar under Article 20(2) of the Constitution of India in such a case would not be attracted. The failure to pay the penalty by itself attracts prosecution under Section 23F and on conviction by the court for the said offence imprisonment may follow.
(iii) Securities and Exchange Board of India v. Ajay Agarwal [(2010) 3 SCC 765]:
24. The right of a person of not being convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence and not to be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the Supreme Today With All High Courts Page 5 of 8 offence, is a Fundamental Right guaranteed under our Constitution only in a case where a person is charged of having committed an offence and is subjected to a penalty.
25. In the instant case, the respondent has not been held guilty of committing any offence nor has he been subjected to any penalty. He has merely been restrained by an order for a period of five years from associating with any corporate body in accessing the securities market and also has been prohibited from buying, selling or dealing in securities for a period of five years.
26. The word offence under Article 20 sub-clause (1) of the Constitution has not been defined under the Constitution. But Article 367 of the Constitution states that unless the context otherwise requires, the General Clauses Act, 1897 shall apply for the interpretation of the Constitution as it does for the interpretation of an Act.
27. If we look at the definition of offence under General Clauses Act, 1897 it shall mean any act or an omission made punishable by any law for the time being in force. Therefore, the order of restrain for a specified period cannot be equated with punishment for an offence as has been defined under the General Clauses Act.
28. Under Criminal procedure code, offence has been defined under Section 2(n) as follows:
2(n) offence means any act or omission made punishable by any law for the time being in force and includes any act in respect of which a complaint may be made under Section 20 of the Cattle-trespass Act, 1871 (1 of 1871);
29. On a comparison of the aforesaid two definitions we find that there are common links between the two. An offence would always mean an act of omission or commission which would be punishable by any law for the time being in force.
30. Article 20(1) was interpreted by the Court in Rao Shiv Bahadur Singh and another v. State of Vindhya Pradesh, (AIR 1953 SC 394). Jagannadha Das,J. speaking for Constitution Bench, on a comparison of similar provisions in English Law and American Constitution, opined that the language used in Article 20 is in much wider terms. This Court held that: (AIR p.398, para 8) ...what is prohibited is the conviction of a person or his subjection to a penalty under `ex post facto laws. The prohibition under the Article is not confined to the passing or the validity of the law, but extends to the conviction or the sentence and is based on its character as an `ex post facto law The ratio of this judgment has again been affirmed in State of West Bengal v. S.K. Ghosh, (AIR 1963 SC 255), wherein another Constitution Bench of this Court speaking through Justice Wanchoo, as His Lordship then was, held that a forfeiture by a District Judge under Section 13(3) of Criminal Laws Amendment Ordinance of 1944 cannot be equated to a forfeiture under Section 53 of IPC inasmuch as forfeiture under Section 13(3) of the Ordinance involved embezzlement of government money or property and the same is not punishment or penalty within the meaning of Article 20(1) of Constitution (See paras 14 and 15 of the judgment).
(iv) Jawaharmal v. State of Rajasthan and Others [(1966) 1 SCR 890]:
18. It is well recognised that the power to legislate includes the power to legislate prospectively as well as retrospectively, and in that behalf, tax legislation is no different from any other legislation. If the Legislature decides to levy a tax, it may levy such tax either prospectively or even retrospectively. When retrospective legislation is passed imposing a tax, it may, in conceivable cases, become necessary to consider whether such retrospective taxation is reasonable or not. But apart from this theoretical aspect of the matter, the power to tax can be competently exercised by the legislature either prospectively or retrospectively; and that is precisely what Section 2 has done in the present case. Therefore, there is no substance in the argument that Section 2 of the Act is invalid.
7. In view of the aforesaid authoritative judicial pronouncements, the learned counsel appearing for the private respondents fairly states that he cannot dispute the proposition that the amendment can be made applicable from a retrospective date on account of the above reasoning emanating from the judgments. The first ground for setting aside the Government Order thus cannot be sustained.
8. Insofar as the second ground dealing with the right of hearing the affected parties is concerned, the Government Order, being in the nature of a subordinate legislation, it can hardly be said that a party likely to be affected has to be first heard before the subordinate legislation is brought into force. This ground also does not survive.
9. The third ground arose out of a plea that the relevant material was not made available to the private respondents. However, in this behalf, we may refer to the averments made in the counter affidavit itself, as contained in paragraph 5, the relevant portion of which is extracted as under:
5. ..... The copy of the statements have been given to the writ petitioner then and there from 1.2.88 onwards. These statements have been verified and signed by both the third respondent as well as authorised representative of the writ petitioner. Therefore, it is submitted that furnishing of another working sheet to the writ petitioner for the penalty of Rs.17.96 lakhs is considered to be not necessary and the present allegation is only an attempt to evade payment.
10. Learned counsel for the private respondents has produced before us the rejoinder to the aforesaid counter affidavit, which, in fact, goes to aid the appellants and thus, it is not in dispute that the material, which is the basis for the demand, was made available to the respondents. In fact, the submission really was that there was a delay in making the demand and such plea can hardly be accepted.
11. Learned Advocate General for the appellants, thus, submits that none of the grounds in the impugned order is sustainable and consequently, the impugned order is required to be set aside. The learned Senior Counsel for the private respondents submits that the original petitioners, disputing the quantification of the amount, which is apparent from the rejoinder, had in fact preferred an appeal to the Secretary, Government of Tamil Nadu, Home, Prohibition and Excise Department, Fort St. George, Chennai-9, on 15.11.1994, a copy of which was annexed to the writ petition, though it has not been placed before us.
12. A perusal of the sub-rule shows that an appeal would lie to the Government since the order has been passed by the Excise Supervisory Officer in pursuance of the instructions of the Commissioner of Prohibition and Excise, as per sub-rule 5 of Rule 2 of the Tamil Nadu Prohibition Appeal and Revision Rules, 1983, dealing with the appeals, which reads as under:
2. Appeal:
(1) to (4) ....
(5) An Appeal shall lie to the Government from an original order passed by the Commissioner of Prohibition and Excise and against an original order passed by the Commissioner in the discharge of his functions as a Collector.
13. Learned Advocate General, on the other hand, submits that this representation, which was requested to be treated as an appeal, apparently, is not available in the records of the appellants.
14. In view of the pendency of the petition and appeal, we are of the view that if the parties have preferred an appeal before the State Government, the same is required to be considered on merits on the issue of quantification. In this behalf, we may however note that Rule 5 deals with limitation, while the fee leviable is provided in Rule 6. If there are defects in preferring the appeal, we grant two weeks time to the private respondents to cure the defects, so that the appeals can be examined on merits. To facilitate the said consideration, copy of the representation/appeal of the private respondents be also provided to the appellant authorities required to deal with the appeals on merits.
15. We, thus, allow the writ appeals and set aside the impugned order dated 16.12.2006, but while doing so, grant liberty to the private respondents to urge the issue of quantification of the demand in terms aforesaid. The parties are left to bear their own costs.
Note:- [S.K.K., CJ] [M.S.N., J.]
Issue order copy within three days. 5th November, 2014.
Index : yes
Internet : yes
ATR
To
1. The Secretary to Government
Government of Tamil Nadu
Home, Prohibition and Excise Dept.
Fort St. George, Chennai 9.
2. The Commissioner of Prohibition
and Excise
Chepauk, Chennai 5.
The Hon'ble The Chief Justice
and
M. SATHYANARAYANAN,J.
ATR
W.A. Nos. 963 to 965 of 2014
05.11.2014