Karnataka High Court
M/S Hotel Welcome vs Deputy Commissioner on 17 November, 2023
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NC: 2023:KHC-D:13386
WP No. 106079 of 2015
IN THE HIGH COURT OF KARNATAKA, DHARWAD
BENCH
DATED THIS THE 17TH DAY OF NOVEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE
WRIT PETITION NO. 106079 OF 2015 (EXCISE-)
BETWEEN:
M/S. HOTEL WELCOME
(BAR AND RESTAURANT) CL-7,
CTS NO.1610/2B, BANK ROAD,
GADAG, DISTRICT GADAG.
REP. BY ITS PARTNER
SMT. PREMILABAI RAMAKRISHNA KABADI,
AGED ABOUT 65 YEARS, OCC: BUSINESS,
R/O. GADAG-BETAGERI, DISTRICT GADAG.
...PETITIONER
(BY SRI RAJASHEKHAR BURJI, ADVOCATE)
AND:
1. DEPUTY COMMISSIONER
DISTRICT GADAG, GADAG.
Digitally signed
by
MOHANKUMAR
MOHANKUMAR B SHELAR
B SHELAR
Date:
2023.11.21
13:22:09 +0530
2. DEPUTY COMMISSIONER OF EXCISE,
DISTRICT GADAG, GADAG. ...RESPONDENTS
(BY SRI SHIVAPRABHU HIREMATH, AGA)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER
BEARING EXE/IML/CR/71/2012-13 DATED 15.05.2014 PASSED BY
THE 2ND RESPONDENT PRODUCED AT ANNEXURE-A AS ILLEGAL
AND DIRECT THE 2ND RESPONDENT TO CONSIDER THE CASE OF
THE PETITIONER UNDER RULE 17-A OF THE KARNATAKA EXCISE
LICENSES (GENERAL CONDITION) RULES 1967.
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NC: 2023:KHC-D:13386
WP No. 106079 of 2015
THIS PETITION, COMING ON FOR FURTHER HEARING, THIS
DAY, THE COURT MADE THE FOLLOWING:
ORDER
Heard the learned counsel for the petitioner as well as learned AGA for the respondents-State.
2. This petition is filed challenging the order dated 15.05.2014 passed by the 2nd respondent. In terms of the said order, the 2nd respondent has imposed transfer fee of Rs.2,15,000/- and additional fee of Rs.32,250/- totaling to Rs.2,47,250/- on an application filed by the petitioner for renewal of CL-7 license.
3. Admittedly, CL-7 licence was initially issued in favour of the petitioner which is a partnership firm constituted in the year 2000. The Partnership Deed is produced at Annexure-B. It is evident from the said Partnership Deed that there were four partners, when the partnership firm was constituted.
4. It is the case of the petitioner that one of the partners namely Ramakrishnasa Ramachandrasa Kabadi died on 30.11.2006. The Partnership Deed provides that in the event of death of any of the partners, the partnership shall continue and surviving partners shall admit the legal heir or such others as -3- NC: 2023:KHC-D:13386 WP No. 106079 of 2015 may be decided or agreed by the continuing partners, as a partner in place of the deceased partner. Admittedly, the wife of the deceased partner is inducted to the said partnership. The newly constituted Partnership Deed is produced at Annexure-F.
5. The application seeking renewal of CL-7 licence in the name of partnership firm is rejected in terms of Annexure-A on the premise that induction of legal representative of the deceased partner amounts to change of composition of the partnership firm. Thus, the respondent is of the view that it amounts to transfer of the licence and not just renewal of licence. The authority is of the view that the fee chargeable in such situation is governed by Rule 17-B of the Karnataka Excise Licences (General Conditions) Rules, 1967 (for short, 'the Rules, 1967').
6. Learned counsel for the petitioner would contend that Rule 17-A of the Rules, 1967 provides that in the event of death of the licensee, during the currency of the licence, the Deputy Commissioner may, on an application by the legal heirs of the deceased licencee with the previous sanction of the -4- NC: 2023:KHC-D:13386 WP No. 106079 of 2015 Excise Commissioner, transfer the licence in favour of the legal representatives and he would also refer to Rule 17-B of the Rules, 1967 and would submit that Rule 17-B of the Rules, 1967 does not apply the present set of facts. Thus, it is urged that the authorities were not justified in demanding the higher licence fee by invoking Rule 17-B of the Rules, 1967. He would further submit that since the Partnership Deed provides for inducting the legal heirs of the deceased partner, for all practical purposes, the composition is the same. The application for renewal of existing licence in the name of the partnership firm should be treated as the application by the same partnership firm which was granted licence.
7. Learned AGA Sri Shivaprabhu Hiremath appearing for the respondents-State would contend that the impugned order is appealable under Section 61 of the Karnataka Excise Act, 1965. It is his further submission that Rule 17-A of the Rules 1967 does not apply to the partnership firm and it only applies to the individual licencee or lessee. The authority justified in demanding higher licence fee by invoking Rule 17-B of the Rules, 1967. He would also refer to the Judgment of this Court -5- NC: 2023:KHC-D:13386 WP No. 106079 of 2015 dated 19.07.2012 passed in Writ Petition No.17393/2012 and connected matters.
8. Learned counsel for the petitioner in reply would contend that the petition is filed in the year 2015 and for the last eight years respondents have not raised any objections relating to the alternative remedy and as such objection should not be entertained at this stage. It is the further contention of the learned counsel for the petitioner that in terms of the Judgment referred in Writ Petition No.19893-95/2013 (Excise) the issue is squarely covered and this Court has taken a view that in case of death of a partner of partnership firm and the partnership firm (after inducting the legal heir of the deceased partner) applies for renewal of license, should not be construed as an application by a different entity and it should be construed as an application by the same entity which was given licence earlier.
9. This Court has considered the contentions raised at the bar.
10. As far as the contention relating to the alternative remedy being available to the petitioner, this Court is of the -6- NC: 2023:KHC-D:13386 WP No. 106079 of 2015 view that this contention cannot be permitted to be raised after the eight years in the facts and circumstances of this case. Hence, exercising the discretion vested with the Court, the objection relating to the alternative remedy is overruled and petition is considered on merit.
11. In the judgment cited by the learned AGA appearing for the respondents-State, this Court has observed in paragraphs No.21 and 22 of the said Judgment as under:
"21. If a licence is issued in the name of a firm consisting of specified persons as its partners on the basis of the details furnished at the time when the application is filed and if such firm, later on, undergoes change in its constitution/composition or control or management, then it may result in the licence being impliedly transferred in favour of the re-constituted partnership firm. Merely because some of the old partners have continued in the re-constituted firm, may not be a defence to avoid the rigour of Rule 17-B. It all depends on the facts and circumstances of each case. If a partner is newly inducted and he has no real role in the management and control of the existing firm in whose favour the licence is granted, and where such induction does not in any manner bring about major change in the shares -7- NC: 2023:KHC-D:13386 WP No. 106079 of 2015 held by the partners, then a defence will be open to the firm to say that there is no implied transfer. But, where in a given case induction of new partners has resulted in implied transfer of the management and control in favour of new partners as well, then the rigour of Rule 17-B cannot be avoided.
22. Rule 17-B is required to be strictly construed. It has to be given its full effect. It has to be borne in mind that the lecencee has no right to transfer the licence. He cannot achieve this object by camouflaging his actions by resorting to re- constitution of the firm. Whether the action is a matter that depends on the facts and circumstances of each case and the competent authority has to examine the same."
12. On a reading of the aforementioned paragraphs it is evident that whether induction of a legal representative of a deceased partner, as a partner of the partnership firm, amounts to creation of a new firm, and the licence issued/renewed in favour of such firm should be construed as a licence to a new firm, and whether such new licence issued/renewed amounts to transfer of licence attracting higher fees, depends on the facts of each case. The co-ordinate bench of this Court has not held that in the event of partnership being -8- NC: 2023:KHC-D:13386 WP No. 106079 of 2015 reconstituted on account of induction of legal representative of a deceased partner, should be construed as a new entity for the purpose of charging higher fees while renewing licence in all circumstances.
13. Coming to the facts of this case, it is evident that the partnership firm came into existence in the year 2000. Thereafter, partnership firm obtained a CL-7 license. The said licence was in force in the year 2006 when one of the partners died. The wife of the deceased partner was inducted in place of deceased partner. Rest of the partners continued to be the partners of the firm. The reconstituted Partnership Deed reveals these facts. The only change in the composition of the firm is on account of death of one of the partners and induction of the legal representative of the deceased partner which is permitted under the partnership deed.
14. It is also relevant to note that since 2006 till today the CL-7 licence is renewed. This being the case, the contentions raised by the State based on the order passed in Writ Petition No.17393/2012 and connected matters do not come to the aid of the respondents-State. On the other hand, -9- NC: 2023:KHC-D:13386 WP No. 106079 of 2015 the observations made by the co-ordinate bench of this Court in the judgment cited by the learned AGA would support the stand of the petitioner.
15. It is relevant to note the licence was issued since 2006 to 2015 in the name of the firm which continued to exist even after the death of one of the partners. It is not the finding of the respondent/authority that the change in the composition of the firm on account of induction of the wife of one of the partners was with an intention to transfer the licence to the newly inducted partner by surrendering the rights of the remaining partners. The application is renewed by charging higher fees under Rule 17-B of Rules, 1967 on the premise that the induction of the wife of the deceased partner changes the composition of the firm and the renewal of licence amounts to transfer of licence to a new firm.
16. In the judgment cited by the learned counsel for the petitioner, a co-ordinate bench of this Court in paragraph Nos.10 and 11 has held as under :
"10. A bare reading of the Rule 17-A of the Rules makes it abundantly clear that, in the event of the death of a partner in a partnership firm, a licensee, during the currency of the licence, the
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NC: 2023:KHC-D:13386 WP No. 106079 of 2015 Deputy Commissioner may on an application by the legal heirs of the deceased with the previous sanction of the Excise Commissioner, transfer the licence in their favour.
11. If that is so, then the legal representative of the deceased K.B.Motekar is entitled to be inducted as a partner in the partner
- firms and the Deputy Commissioner is bound by Rule 17-A to transfer the licences in respect of the three firms. In that view of the matter, Rule, 17-B has no application to the facts of the case."
17. On a reading of the aforementioned judgment and on appreciation of the facts of the case, it can be concluded that there are no materials to hold that the composition of the partnership firm has changed to such an extent to construe the new partnership as a new entity for the purpose of issuance of licence under the Act of 1965 and Rules, 1967. No materials are placed to hold that the change of composition of the partnership firm by inducting the wife of the deceased partner is done with an intention to circumvent the provisions of law attracting higher renewal charges.
18. It is also relevant to note that from the year 2000 till today, the licence is issued/renewed in the name of the
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NC: 2023:KHC-D:13386 WP No. 106079 of 2015 petitioner firm. And admittedly, there was a licence in the name of the partnership firm when one of the partners died. This being the position, this Court has to hold that the order passed in Writ Petition No.19893-95/2013 (Excise) will come to the aid of the petitioner, in the sense that the reconstitution of the partnership firm on account of death of one of the partners cannot be construed as a change, to term it as a transfer of licence, when application is filed for renewal.
19. At this juncture, learned AGA appearing for respondents-State would submit that under the applicable rules, the change of constitution has to be reported to the licensing authority and necessary fee has to be charged. However, no provision of law is pointed out to show the consequence of not reporting the change in the composition of the partnership firm, as noticed in the facts of the case where one of the partners of the firm has died and the partnership firm has continued to function by seeking renewal of licence.
20. In terms of the impugned order, the licensing authority has charged fee of Rs.2,15,000/- towards transfer of licence, which is impermissible in view of the discussions made above and collection of Rs.32,250/- towards additional licence
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NC: 2023:KHC-D:13386 WP No. 106079 of 2015 fee, is also impermissible.
21. Thus, the authorities are liable to refund the excess fees collected after retaining any fee payable under Rule 17-A of the Rules, 1967 for renewal of licence as prevailing when the application was filed.
21. The refund shall be made within two months from the date of receipt of copy of this order, failing which respondents shall pay interest at the rate of 8% per annum on the said amount, from the date of default till the date of repayment.
With the above observation and direction, petition is allowed.
Sd/-
JUDGE CKK/CT-an List No.: 1 Sl No.: 30