Karnataka High Court
M/S High Point Hotels Pvt Ltd vs The Excise Commissioner In Karnataka on 18 August, 2017
Author: Vineet Kothari
Bench: Vineet Kothari
1/97
R
IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 18TH DAY OF AUGUST, 2017
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
W.P.No.27575/2017, W.P.No.28172/2017
C/W
W.P.No.27988/2017, W.P.No.29609/2017,
W.P.No.31513/2017, W.P.No.31515/2017,
W.P.No.31517/2017, W.P.No.31518/2017,
W.P.No.25895/2017 AND W.P.No.26805/2017 (EXCISE)
W.P.No.27575/2017:
Between:
M/s. High Point Hotels Pvt. Ltd.,
No.42, 4th Cross, Industrial Layout
5th Block, Koramangala
Bengaluru-560 001.
By Managing Director
Kanchan Lulla
W/o Late Harish Lulla
Aged about 61 years.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
BMTC Building, Shantinagar
Bengaluru-560 027.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
2/97
2. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560001.
3. The Deputy Commissioner of Excise
Bengaluru Urban District
Bengaluru-560027.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of certiorari
or any other appropriate writ, order or direction quashing
the impugned demand as per Annexure-G dated 28-05-2015
issued by the respondent No.2 in EXE AGA AUDIT 41/2012-
13 & etc.
W.P.No.28172/2017:
Between:
M/s. Omkar Enterprises
CL-9 Licensee
A Partnership firm near Tin Factory
No.33-34, Keerthi Building
Old Madras Road, Dooravaninagar
Bengaluru
By is partner
K. Prakash Shetty
S/o Prabhakar Shetty.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
BMTC Building, Shantinagar
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
3/97
Bengaluru-560 001.
2. The Deputy Commissioner
Bangalore Urban District (East)
Bengaluru-560001.
3. The Deputy Commissioner of Excise
Bengaluru Urban District (East)
Bengaluru-560001.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of certiorari
or any other appropriate writ, order or direction quashing
the impugned notice as per Annexure-F dated 28-05-2015 in
No.EXE AGA AUDIT 41/2012-13 & etc.
W.P.No.27988/2017:
Between:
Y.R. Manohar
S/o R.K. Kanchan
Aged about 64 years
CL-9 Licensee
M/s. Brigade Garden
No.48/12, 2nd Floor
Brigade Road
Bangalore-560 001.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
4/97
BMTC Building, Shantinagar
Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560 009.
3. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560009.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of
mandamus directing the respondent No.2 and 3 to renew the
license of the petitioner in Form CL-9 for the Excise year
2017-18 which is now in force as per Annexure-A bearing
No.EXE BEM (VA)(PU)(45)/10/CL-9-2016-17 & etc.
W.P.No.29609/2017:
Between:
Speciality Restaurants Pvt. Ltd,
CL-9 Licensee
No.136, 1st Cross Road, 5th Block
Jyoti Nivas College Road
Koramangala.
Represented by Santanu Karmakar.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
5/97
BMTC Building, Shantinagar
Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District
Bengaluru-560009.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of
mandamus directing the respondent No.2 and 3 to renew the
license of the petitioner in Form CL-9 for the Excise Year
2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31513/2017:
Between:
Main Land China
CL-9 Licensee
Aged about 42 years
No.14, Church Street
Bangalore
By its Manager
Santanu Karmakar.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
6/97
BMTC Building, Shantinagar
Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District
Bengaluru-560009.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of
mandamus directing the respondent No.2 and 3 to renew the
license of the petitioner in Form CL-9 for the Excise Year
2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31515/2017:
Between:
C.K. Dasappa
S/o. Late Kariyappa Gowda
Aged about 63 years
CL-9 Licensee
28/2, 1st Floor, Primus
Siddapur, White field
Main Road, Bengaluru.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
7/97
BMTC Building, Shantinagar
Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District (East)
Bengaluru-560009.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of
mandamus directing the respondent No.2 and 3 to renew the
license of the petitioner in Form CL-9 for the Excise Year
2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31517/2017:
Between:
Specialty Restaurants Pvt. Ltd.
Cl-9 Licensee
Aged about 42 years
No.24, Upper Ground Orion Mall
Rajkumar Road
Malleshwaram West, Bangalore
By its Manager & Authorised Representative
Santanu Karmakar.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
8/97
BMTC Building, Shantinagar
Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District
Bengaluru-560009.
4. Inspector of Excise
Subramanyanagara Range
Bengaluru-560021.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of
mandamus directing the respondent No.2 and 3 to renew the
license of the petitioner in Form CL-9 for the Excise Year
2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31518/2017:
Between:
Specialty Restaurants Pvt. Ltd.
Cl-9 Licensee
Aged about 42 years
No.4032, Golden Lights
II Stage, 5th Block, HAL
100ft. Road, Jyoti Nivas College Road
Bengaluru
By its Manager
Santanu Karmakr.
... Petitioner
(By Mr. K.P. Kumar, Senior Counsel for
Mr. G.K. Bhat, Advocate)
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
9/97
And:
1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, 'A' Block
BMTC Building, Shantinagar
Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District (East)
Bengaluru-560009.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of
mandamus directing the respondent No.2 and 3 to renew the
license of the petitioner in Form CL-9 for the Excise Year
2017-18 which is now in force as per Annexure-A & etc.
W.P.No.25895/2017:
Between:
Sea Route Bar & Restaurant
No.725, 1st Floor, M.K. Towers
Modi Hospital Road
Rajajinagar 1st Stage
Bangalore-560 001
Represented by its
Proprietor Mr. P. Krishna.
Old Address:
Searock Bar & Restaurant
No.20/3, 27/4
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
10/97
Kumara Park East
Haikrishna Road
Shivanand Circle
Bangalore-560 001.
... Petitioner
(By Mr. Ismail Muneeb Musba, Advocate)
And:
1. The State of Karnataka
By its Principal Secretary
Finance Department
Vidhana Soudha
Bangalore-560 001.
2. The Deputy Commissioner Excise
Vokkaligara Bhavana
Ranichennamma Circle
Bengaluru-560 001.
3. The Deputy Commissioner
Bangalore City
Bengaluru-560001.
4. Inspector of Excise
North Range
Bangalore-560 022.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of certiorari
or any other appropriate writ, direction or order quashing
demand notice bearing No.E.Ex.E/AG Audit/41/2012-13
dated 28-05-2015 produced hereto as Annexure-B issued by
the Respondent No.3, D.C. Bangalore City & etc.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
11/97
W.P.No.26805/2017:
Between:
Sri. T.N. Krishnamurthy
S/o Narasimhaiah @ Narase Gowda
Aged about 62 years
Prop: M/s. Lacasa Bar & Restaurant
Katha No.877/1, 878/2, 895/19 & 896/20
1st and 2nd Floor, Blooming Dale
Kasavanahalli Carmala Ram Post
Bangalore-5600035.
... Petitioner
(By Mr. K.N. Putte Gowda, Advocate)
And:
1. The State of Karnataka
Rep. by its Principal Secretary
to Government
Department of Finance
Vidhana Soudha
Dr. B.R. Ambedkar Veedhi
Bangalore-560 001.
2. The Commissioner of Excise
Government of Karnataka
2nd Floor, TTMC 'A' Block
BMTC Building, Shanthinagar
Bengaluru-560 027.
3. The Deputy Commissioner
Bangalore Urban District
Bengaluru-560009.
4. The Deputy Commissioner of Excise
Bangalore Urban District
Bangalore-560001.
... Respondents
(By Mr. A.M. Suresh Reddy, AGA)
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
12/97
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue writ of certiorari or
any other appropriate writ or order to quash the
Order/Notice bearing No.EXE/IML/
KA.MA.E/90/KMR/2017-17 dated 24-05-2017 Annexure-E
issued by the third respondent for cancellation of License in
respect of Lacasa Bar and Restaurant situated katha
No.877/1, 878/2, 895/19 and 896/20, 1st and 2nd Floor,
Blooming Dale, Kasavanahalli, Carmala Ram Post,
Bangalore-560035 as the same is illegal, arbitrary, unjust
and in violation of the principles of natural justice apart from
being contrary to Karnataka Excise (sale of Indian and
Foreign Liquors) Rules, 1968 & etc.
These Writ Petitions having been reserved for orders
on 25/07/2017, coming on for pronouncement, this day,
Dr Vineet Kothari J., delivered the following:
JUDGMENT
1. Though the controversy involved in the present batch of petitions regarding levy of Penalty under Rule 14 (2) of the Karnataka Excise (Sale of Indian and Foreign Liquor) Rules, 1968 (hereinafter called 'Excise Rules of 1968' for brevity) is covered by an order passed by this Court in Writ Petition No.10335/2017 (Lakshmi Bar and Restaurant Vs. The State of Karnataka and others), decided on 27/06/2017, yet, Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 13/97 the learned counsels for the petitioners urged this Court to give them a further opportunity to raise certain additional grounds in the matter and accordingly again an opportunity was afforded to both the sides to address their argument before Court.
2. The controversy in brief is regarding the imposition of Penalty for the short-lifting of the liquor during the period in question as against the quantity prescribed under the Rule 14(2) of the Excise Rules of 1968 from the sole Distributor of Liquor in the State, viz. Karnataka State Beverages Corporation Limited (KSBCL). The said Rule 14(2) of the Excise Rules of 1968 which was inserted on the Statute Book with effect from 01/04/2003 was omitted with effect from 01/08/2014 and the demand in question of the said Penalty which has been held to be in the nature of a fiscal liability in the aforesaid judgment of this Court is only for the different periods falling between these two Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 14/97 dates when the said Rule was existing on the Statute Book.
3. The relevant part of the aforesaid order passed by this Court on 27/06/2017 is quoted herein below again for ready reference:
"7. Having heard the learned counsels, this court is of the opinion that the present Writ Petition has no force and is liable to be dismissed. The reasons are as follows.
8. Before deletion of Sub Rule (2) of Rule 14 of the Karnataka Excise (Sale of Indian & Foreign liquor) Rules, 1968, although the second proviso to the said Rule provided for an opportunity of hearing to the licencee, if he fails to lift the minimum quantity of liquor so fixed per month, which quantity was specified in the said rule itself, before the penalty at the rate of Rs.100/- for every bulk litre on the quantity short lifted, is imposed and if there are two such monthly defaults, the licence itself was Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 15/97 liable to be cancelled and the second proviso to Rule 14 provided that the licencing authority shall give a reasonable opportunity of being heard, before levying the penalty or canceling the licence.
9. As stated above, the said Rule 14(2) itself stands deleted from the statute book with effect from 1.8.2014 and the impugned demand notices and the order was passed by the Deputy Commissioner are all after the said deletion of the said Rule 14(2) of the Rules. So no enforcement of that Proviso can be claimed as of right now. Even otherwise, this court is of the opinion that if the petitioner had any objection to the fact of the short lifting of the liquor, it was fully open to her to raise such an objection after the first demand notice Annexure-D dated 20.5.2016 was served upon her. But, not only after the Annexure-D demand notice dated 28.5.2016, even after second demand notice Annexure-E dated 16.8.2016, the petitioner never raised any demur or objection before the respondent - authority Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 16/97 against the demand of penalty for such short lifting for condoning or waiving such penalty.
10. On the contrary, for seeking the renewal of the licence for the next year 2016-17, she gave a clear Undertaking before the Department that she would pay the said penalty for short lifting of the liquor for the previous year 2015-16 vide Annexure-R1 dated 28.6.2016.
11. It is also seen from the perusal of Rule 14 which is quoted herein below in extenso that it is not actually a penalty requiring any mensrea or guilty animus on the part of the licencee. It is rather a fiscal liability or the price for deficit in full assured supply to be taken as fixed on the licencee to compensate the respondent - Department or the authorized Distillery company, for the short lifting of the liquor. The said Rule was introduced in the statute book to regulate the supply of only authorized and properly manufactured liquor from the authorized licencees only to avoid the smuggling of illegal liquor into the market Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 17/97 through illegal outlets or source. To check such a menace, if a liability is fixed under the Rule for payment of price for the short lifted quantity of liquor, the same cannot be said to be a penalty requiring any guilty animus on the part of the licencee so as to require prior opportunity of hearing. The fact of short lifting is to be computed as per the minimum quantity prescribed under Rule 14 itself and the rate of penalty of Rs.100/- per bulk litre is also provided therein. Therefore, nothing much can be achieved to the contrary by giving an opportunity of hearing as demanded in the present case for explaining the reasons for such short lifting of the liquor, attracting the imposition of penalty under Rule 14(2) of the said Rules which now stands deleted from the statute book itself w.e.f. 1.8.2014. The said 2nd Proviso for giving opportunity of hearing can be more usefully pressed into service if the other consequence under Rule 14(2) is to follow namely the cancellation of licence itself and therefore, the application of the said 2nd Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 18/97 proviso should be limited for that part of first proviso to Rule 14(2) of the said Rules.
"Rule 14 - Licensee to abide by the provisions of the Act etc. [(1)] The licensee or his successors or assignees shall have no claim whatsoever to the continuance or renewal of the licence as the case may be, after the expiry of the period for which such licence was granted.
[(2) The licensees holding retail shop licenses in Form CL-2 and Bar licences in Form CL-9 shall lift for sale [from a distributor licensee (CL-11) or a distributor licensee for vend of foreign liquor (CL-11A)], the minimum quantity of liquor (excluding fenny, wine and beer) fixed per month for the shop based on the license fee prescribed for each type of license, overheads, other expenses incurred, location of the shop, area of operation, sale of liquor in the previous years, and similar factors to ensure that illicit liquor is not obtained Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 19/97 by the licensees and sold in the shop, to ensure that no attempt is made to undersell the liquor and thereby wholesome liquor obtained only from authorized sources is sold to the consumers. In case the licensee fail to lift the minimum quantity of liquor so fixed per month, he shall be liable to pay a penalty at the rate of Rs.100.00 for every bulk litre on the quantity short lifted:
Sl. Type of Licence Licence fee Minimum No. quantity of liquor to be lifted in a month (excluding fenny, wine and beer) (1 case = 9 B.L) (01) Retail Shop (CL-
2)
Rs. 2,23,000 47 cases or 423
(a)City Municipal bulk litres
Corporation areas
having population
more than 20
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 20/97 Lakhs Rs. 1,82,000 44 cases or 396
(b) Other city bulk litres Municipal Corporation areas 38 cases or 342 Rs. 1,65,000 bulk litres
(c) City Municipal Council Rs. 1,25,000 32 cases or 288 Areas bulk litres Rs. 1,00,000
(d) Town 23 cases 207 bulk Municipal litres.
Council/Town Panchayat Areas
(e) Other Areas (02) Refreshment Room (Bar) (CL-9) 52 cases or 468 Rs. bulk litres
(a)City Municipal 3,00,000 Corporation areas having 47 cases or 423 population more than 20 Lakhs: bulk litres
(b) Other city Rs. 42 cases or 378 Municipal 2,31,000 bulk litres Corporation 34 cases or 2306 areas bulk litres (c) City Rs. 25 cases 225 Municipal 1,82,000 bulk litres.
Council Areas
(d) Town
Municipal Rs.
Council/Town 1,30,000
Panchayat
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 21/97 Areas Rs.
1,00,000
(e) Other Areas Provided that in case the licensee fails to lift the minimum quantity so fixed consecutively for two months, the license may liable to be cancelled:
Provided further that the licensing Authority shall give the licensee, a reasonable opportunity of being heard before levying the penalty or canceling the license.
The minimum quantity of liquor (excluding fenny, wine and beer) to be lifted in a month by a CL-2 (Retail shop)/ CL-9 (Bar) licensee is as follows:
12. From the facts in the present case, it is not seen anywhere that the petitioner had raised any objection or has given any explanation suitable or otherwise for such short lifting of the liquor from the respondent -
Department or its authorized Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 22/97 licencee/manufacturer. Even if the principles of natural justice were to be complied with as argued by the learned counsel for the petitioner, the same cannot yield anything in the facts of the present case. Being already aware of the fact situation, the petitioner was expected at least to raise the objection or give the reasons for such short lifting of the liquor, but nothing of this sort is seen in the present case.
13. On the other hand, the petitioner seems to have even concealed the material facts from this court, interalia, the fact of the subsequent order having been passed on the Undertaking given by the petitioner herself on 28.06.2016 and such order having been passed by the Deputy Commissioner on 30.06.2016.
14. Thus the petitioner has presented this Writ Petition with incomplete picture of the facts.
15. It is well settled that those who have approached under Article 226 of the Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 23/97 Constitution of India, exercising writ jurisdiction has to come to the court with absolutely clean hands and complete facts presented to the Court and if the court finds that there is a concealment of material facts, the court can refuse to go into the merits of the case at all and dismiss such Writ Petition only on the short ground of concealment of material facts.
16. In either of the case, this court is not inclined to entertain this petition on the short ground of alleged breach of principles of natural justice and on the contrary, this court is fully satisfied that the case does not merit any relief in the present case. Therefore, the Writ Petition is liable to be dismissed.
Accordingly, the petition is dismissed. No costs."
4. Mr. K.P. Kumar, learned Senior Counsel and other counsels appearing for the petitioners made the following submission despite the aforesaid judgment before this Court for consideration by this Court:
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 24/97 I. That with the omission and deletion of the said provisions of Rule 14(2) of the Excise Rules of 1968 with effect from 01/08/2014, since the proceedings for recovery of the Penalty for short-lifting of the liquor have been initiated after the said date of 01/08/2014, therefore, in view of the following Supreme Court decisions by the Constitution Benches, such proceedings could not be initiated or continued, even if they were initiated prior to 01/08/2014;
(i) M/s. Rayala Corporation (P) Ltd. And Another Vs. The Director of Enforcement, New Delhi (AIR 1970 SC
494);
(ii) Kolhapur Canesugar Works Ltd. And Another Vs. Union of India and others (AIR 2000 SC 811);
II. That the impugned demand notices for the said Penalty under Rule 14(2) of the Excise Rules of 1968 have been issued without giving any opportunity Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 25/97 of hearing to the petitioners and since such short-lifting of the liquor could depend upon or caused by several factors therefore an opportunity in this regard ought to have been provided by the Respondent Authority to the petitioners.
III. That the imposition of Penalty at fixed rate of Rs.100/- per bulk litre and some of them may be costly and some may be of cheaper rates and therefore the "loss of revenue" allegedly caused to the Respondent -
State on account of such short-lifting of the liquor was a question of fact to be determined by the Respondent -
Assessing Authority for which a notice and opportunity of hearing was necessary and therefore, the aforesaid rate of Penalty at the rate of Rs.100/- per bulk litre cannot be justified in all the cases alike.
IV. Since Rule 14 (2) of the Excise Rules of 1968 for levy of such Penalty is a charging provision therefore with its omission and deletion with effect from 01/08/2014, neither the alleged offence for short-lifting Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 26/97 of the liquor remains on the Statute Book nor the charging provision for levy of the same even as a fiscal liability remains and therefore the proceedings determining such liability for the petitioners and the question of recovery of the same does not arise after 01/08/2014.
5. Mr. K.P. Kumar, learned Senior Counsel submitted before the Court that in the case of M/s.
Rayala Corporation (P) Ltd. (supra), in a case relating to prosecution under the provisions of Foreign Exchange Regulation Act, 1947 (hereinafter referred to as 'FERA' for short), the Hon'ble Supreme Court considered the question whether the proceedings for prosecution of the delinquent could be validly continued under Rule 132-A of Defence of India Rules 1962 after the said Rule 132-A as a whole ceased to be in existence as a result of the Notification issued by the Ministry of Home Affairs on 30/03/1965.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 27/97
6. Mr. Kumar submitted that the said question was answered in the negative by the Hon'ble Supreme Court in the following manner. The relevant extract from paragraphs 12 and 14 of the said judgment in the case of M/s. Rayala Corporation (P) Ltd. (supra) are quoted below for ready reference.
"12. There remains for consideration the question whether proceedings could be validly continued on the complaint in respect of the charge under Rule132-A (4) of the D.I. Rs. against the two accused. The two relevant clauses of Rule 132-A are as follows:
"132A. (2) No person other than an authorized dealer shall buy or otherwise acquire or borrow from, or sell or otherwise transfer or lend to, or exchange with, any person not being an authorized dealer, any foreign exchange.
(4) If any person contravenes any of the provisions of this rule, he shall be punishable Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 28/97 with imprisonment for a term which may extend to two years, or with fine, or with both; and any Court trying such contravention may direct that the foreign exchange in respect of which the Court is satisfied that this rule has been contravened, shall be forfeited to the Central Government."
The charge in the complaint against the two accused was that they had acquired foreign exchange to the extent of Sw.Krs. 88,913.09 in violation of the prohibition contained in Rule 132A (2) during the period when this Rule was in force, so that they became liable to punishment under Rule 132A (4). Rule 132-A as a whole ceased to be in existence as a result of the notification issued by the Ministry of Home Affairs on 30th March, 1965, by which the Defence of India (Amendment) Rules, 1965 were promulgated. Clause 2 of these Amendment Rules reads as under:-
"In the Defence of India Rules, 1962, Rule 132A (relating to prohibition of dealings in Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 29/97 foreign exchange) shall be omitted except as respects things done or omitted to be done under that rule."
The argument of Mr. Sen was that, even if there was a contravention of Rule 132A (2) by the accused when that Rule was in force, the act of contravention cannot be held to be a "thing done or omitted to be done under that rule," so that, after that rule has been omitted, no prosecution in respect of that contravention can be instituted. He conceded the possibility that, if a prosecution had already been started while Rule 132A was in force, that prosecution might have been competently continued. Once the Rule was omitted altogether, no new proceeding by way of prosecution could be initiated even though it might be in respect of an offence committed earlier during the period that the rule was in force. We are inclined to agree with the submission of Mr. Sen that the language contained in clause 2 of the Defence of India (Amendment) Rules, Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 30/97 1965 can only afford protection to action already taken while the rule was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating a proceeding after the rule had ceased to exist. On this interpretation, the complaint made for the offence under Rule 132A (4) of the D.I. Rs., after 1st April, 1965 when the rule was omitted, has to be held invalid."
"14. On the other hand, Mr. Desai on behalf of the respondent relied on a decision of the Privy Council in Wicks v. Director of Public Prosecutions, 1947 AC 362. In that case, the appellant, whose case came up before the Privy Council, was convicted for contravention of Regulation 2A of the Defence (General) Regulations framed under the Emergency Powers (Defence) Act, 1939 as applied to British subjects abroad by section 3 (1 )(b) of the said Act. It was held that, at the date when the acts, which were the subject-matter of the charge, were Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 31/97 committed, the regulation in question was in force, so that, if the appellant had been prosecuted immediately afterwards, the validity of his conviction could not be open to any challenge at all. But the Act of 1939 was a temporary Act, and after various extensions it expired on February 24, 1946. The trial of the accused took place only in May 1946, and he was Convicted and sentenced to four years' penal servitude on May 28. In these circumstances, the question raised in the appeal was: "Is a man entitled to be acquitted when he is proved to have broken a Defence Regulation at a time when that regulation was in operation, because his trial and conviction take place after the regulation has expired?" The Privy Council took notice of sub- section (3) of Section 11 of the Emergency Powers (Defence) Act, 1939 which laid down that "the expiry of this Act shall not affect the operation thereof as respects things previously done or omitted to be done". It was argued before the Privy Council that the phrase Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 32/97 "things previously done" does not cover offences previously committed. This argument was rejected by Viscount Simon on behalf of the Privy Council and it was held that the appellant in that case could be convicted in respect of the offence which he had committed when the regulation was in force. That case, however, is distinguishable from the case before us inasmuch as, in that case, the saving provision laid down that the operation of that Act itself was not to be affected by the expiry as respects things previously done or omitted to be done. The Act could, therefore, be held to be in operation in respect of acts already committed, so that the conviction could be validly made even after the expiry of the Act in respect of an offence committed before the expiry. In the case before us, the operation of Rule 132A of the D.I. Rs. has not been continued after its omission. The language used in the notification only affords protection to things already done under the rule, so that it cannot permit further application of that rule by Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 33/97 instituting a new prosecution in respect of something already done. The offence alleged against the accused in the present case is in respect of acts done by them which cannot be held to be acts under that rule. The difference in the language thus makes it clear that the principle enunciated by the Privy Council in the case cited above cannot apply to the notification with which we are concerned."
The said judgment relating to 'offence' and 'prosecution' for alleged breach of Rule 132-A of Defence of India Rules is quite distinguishable from the facts of the present case where this question is of compensation to the State for loss of Revenue caused by short-lifting of liquor quantity under Rule 14(2) of the Excise Rules of 1968 is involved.
7. The second case decided by the Constitution Bench of the Hon'ble Supreme Court in the case of Kolhapur Canesugar works (supra) and relied upon by Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 34/97 Mr. Kumar pertain to the provisions for levy of Excise Duty under the provisions of the Central Excise Act, 1944. Under Section 11-A of the said Act read with Rule 10 and 10-A of Central Excise Rules (omitted by Notification dated 06/08/1977) was involved in the case.
8. The Hon'ble Supreme Court extracted the Show Cause Notice given to the assessee in para.8 of the judgment as under:
"8. As the matter stood thus the notice dated 27th April, 1977 was issued by the Superintendent, Central Excise, A.G. - I Kolhapur, which reads as follows :
"NOTICE TO SHOW CAUSE To M/s. Kolhapur Canesugar Works Ltd.
Kashba Savada, Kolhapur Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 35/97 Whereas the Kolhapur Cane Sugar Works Ltd., Kolhapur Holder of L4 No.2/Sug/93 had presented their claim on 12.7.76 for rebate of Central Excise duty on sugar produced in excess during the season 1973-74 by them as new factory commencing production for the first time after 1-10-1973 as per provision of S. No.6 of the table of notification No. 189/73 dated 4-10-1973 and that they were granted a rebate of Rs.61,14,930/- by the Superintendent, Central Excise, AGI Kolhapur vide his letter No. Rebate KCW/73-74/76, dated 23-7-76 and that they had accordingly taken credit of the said amount in their PLA.
Whereas now on re-examination of the facts and circumstances connected with the said rebate claim, it appears that M/s. The Kolhapur Canesugar Works Ltd. Kolhapur are merely a subsidiary of the holding Company viz. M/s. The Kolhapur Sugar Mills Ltd., Kolhapur, are the owners of the subsidiary, since all the share issued by the subsidiary company are purchased by Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 36/97 them. M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur, after formation, have continued the manufacturing of sugar at and with the existing and running factory of M/s. Kolhapur Sugar Mills Ltd., Kolhapur. Though M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur obtained a new licence for the manufacture of sugar, they have not installed and commissioned working the new factory. It appears that only the existing factory has change hands and that the receiving firm is fully owned by transferring firm. Therefore, M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur cannot be considered as a new factory and that they commenced manufacturing of sugar for the first time after 1-10-1973. M/s.
Kolhapur Cane Sugar Works Ltd., Kolhapur, do not thus appear to be entitled to the rebate sanctioned to him as a new factory.
Whereas it appears that M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur are not eligible to rebate for the season 73-74 under any Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 37/97 other provisions of the notification No. 189/73 dated 4-10-73.
2. Now therefore M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur are hereby required to show cause the Assistant Collector, Central Excise Kolhapur, why the rebate of Rs.61,14,930/- erroneously sanctioned and allowed to the credited to their PLA by the Superintendent under his letter No. Rebate/KCW/73-74/76 dated 23-7-73, should not be recovered from them under Rule 10-A of the Central Excise Rules, 1944.
3. M/s. the Kolhapur Cane Sugar Works Ltd., Kolhapur, are further directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence.
4. M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur should indicate in the written explanation whether they wish to be heard in person before the case is decided. If no mention is made about this in their written Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 38/97 explanation, it would be presumed that they do not desire a personal hearing.
5. If no cause is shown against the action proposed to be taken within ten days of the receipt of this notice, or they do not appear before the Assistant Collector, Central Excise, Kolhapur, when the case posted for hearing, the case will be decided on ex-parte.
Sd/ 27-4-77 Superintendent, Central Excise, AGI, Kolhapur"
9. In the aforesaid factual backdrop, the Hon'ble Supreme Court held in paragraphs 13 to 15 as under:-
"13. As noted earlier, prior to 6th August, 1977 the relevant provisions in the rule were Rules 10 and 10-A. In Rule 10 a provision was made for recovery of duties or charges short-levied or erroneously refunded. It was laid down therein that when duties or charges have been short- Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 39/97 levied through inadvertence, error, collusion, or misconstruction on the part of an officer, or through misstatement as to the quantity, description or value of such goods on the part of the owners, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the proper officer may, within three months from the date on which the duty or charge was paid or adjusted in the owner's account-current, if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charges is or are recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice. In sub-rule (2) of Rule
10 the Assistant Collector of Central Excise was vested with the power to pass appropriate order determining the amount of duty or charges due from such person and thereupon such person was to pay the amount so determined within 10 days from Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 40/97 the date on which he is required to pay within the period specified.
14. Rule 10-A contained the provision regarding residuary powers for recovery of sums due to Government where the Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty or of any other sum of any kind payable to the Central Government under the Act. The procedure laid down in this rule was similar to Rule 10 i.e. issue of a show-cause notice for determination of the amount due, etc.
15. Rules 10 and 10-A were omitted and a new provision was introduced by Rule 10 with effect from 6th August 1977. In the said Rule a period of 6 months was prescribed for initiating action for realisation of the duty which has not been levied or paid or has been short levied, erroneously refunded or any duty assessed has not been paid in full. No provision regarding residuary power was made in the Rules."
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 41/97
10. Further, the Hon'ble Supreme Court considered the applicability of Section 6 of the General Clauses Act and the case of M/s. Rayala Corporation Limited (supra) in para 22 of the judgment and held that the earlier view in the decisions of the Gujarat High Court in Saurastra Chemicals Case and the Karnataka High Court in the case of Falcon Tyres Ltd.
was not sound in law.
11. The Hon'ble Supreme Court in Kolhapur Canesugar Works Ltd. (supra) observed in paragraphs 32 to 35 as follows:
" 32. We have carefully considered the decisions in Saurashtra Cement and Chemical Industries, (1993 (42) ECC 126) (Gujarat) (FB) (supra) and Falcon Tyres case (1992 (60) ELT 116) (Kant.) (supra). Though the judgments in these cases were rendered after the decision of the Constitution Bench in Rayala Corporation Pvt. Ltd., (AIR 1970 SC 494: 1970 Crl LJ 588) (supra) a different view Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 42/97 has been taken by the High Courts for the reasons stated in the judgments. The Full Bench of the Gujarat High Court in Saurashtra Cement and Chemical Industries, (1993 (42) ECC 126) (supra), as it appears from the discussions in the judgment, tried to distinguish the decision of the Constitution Bench in M/s. Rayala Corporation (supra) for reasons, we are constrained to say not sound in law. The decision of the Constitution Bench is directly on the question of applicability of Section 6 of the General Clauses Act in a case where a rule is deleted or omitted by a notification and the question was answered in the negative. The Constitution Bench said that "Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule". (page 656 of the Supreme Court Report)."
33. The Full Bench appears to have lost sight of the position that all the relevant terms i.e. Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 43/97 'Central Act', 'Enactment' 'Regulation', and 'Rule' are defined in Sub-section 3(7), 3(19), 3(5), 3(50) and 3(51) respectively of the General Clauses Act. When the term Central Act or Regulation or Rule is used in that Act reference has to be made to the definition of that term in the statute. It is not possible nor permissible to give a meaning to any of the terms different from the definition. It is manifest that each term has a distinct and separate, meaning attributed to it for the purpose of the Act. Therefore, when the question to be considered is whether a particular provision of the Act applies in a case then the clear and unambiguous language of that provision has to be given its true meaning and import. The Full Bench has equated a 'rule' with 'statute'. In our considered view this is impermissible in view of the specific provisions in the Act. When the legislature by clear and unambiguous language has extended the provision of section 6 to cases of repeal of a 'Central Act' or 'Regulation', it is not possible to apply the provision to a case of repeal of a 'Rule'. The Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 44/97 position will not be different even if the rule has been framed by virtue of the power vested under an enactment; it remains a 'rule' and takes its colour from the definition of the term in the Act (General Clauses Act). At the cost of repetition we may say that the omissions in the judgment in M/s. Rayala Corporation (supra) pointed out in paragraph 17 of the judgment of the Full Bench have no substance as they are not relevant for determination of the question raised for the reasons stated herein.
34. In paragraph 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. ICC. Thapar, AIR (1961) SC 838 and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or Regulation under an Act after its repeal and re- enactment. In that case Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 45/97 section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principles laid down by the Constitution Bench in M/s. Rayala Corporation case (supra). In our considered view the ratio of the said decision squarely applies to the case on hand.
35. For the reasons set forth above we do not accept the view taken in Saurashtra Cement and Chemical Industries Ltd., (1993 (42) ECC 126) (Gujarat) (FB) (supra), in Falcon Tyres Ltd., (1992 (60) ELT 116) (Kant) (supra) and the other decisions taking similar view. It is not correct to say that in considering the question of maintainability of pending proceedings initiated under a particular provision of the rule after the said provision was omitted the Court is not to look for a provision in the newly added rule for continuing the pending proceedings. It is also not correct to say that the test is whether there is any provision in the rules to the effect that pending Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 46/97 proceedings will lapse on omission of the rule under which the notice was issued. It is our considered view that in such a case the Court is to look to the provisions in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. In the absence of any such provision in the statute or in the rule the pending proceedings would lapse on the rule under which the notice was issued or proceeding was initiated being deleted/omitted. It is relevant to note here that in the present case the question of divesting the Revenue of a vested right Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 47/97 does not arise since no order directing refund of the amount had been passed on the date when Rule 10 was omitted."
This judgment is not applicable to the present case before this Court as there the question was of recovery of refund wrongly given to petitioner, under Rule 10 and 10-A, after their deletion from Statute Book with effect from 06/08/1977 in re-enacted Rule 10 (Rule 10-A was not re-enacted), no such provision for such recovery was made. But in the present case, no re-enactment of Rule 14(2) of the Excise Rules of 1968 is there after 01/08/2014 and the only question is that whether the proceedings for recovery for the period when the Rule 14 (2) was very much on Statute Book can be initiated and continued or not. The answer has to be given in affirmative on the basis of applicability of Section 6 of theGeneral Clauses Act, 1897 and such levy cannot be allowed to lapse merely because the Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 48/97 provisions of Rule 14 (2) was deleted with effect from 01/08/2014.
12. Both the aforesaid judgments relied upon by the learned Senior Counsel, Mr. Kumar in the case of M/s.Rayala Corporation (P) Ltd. and Kolhapur Canesugar Works Ltd.(supra) were held to be with regard to effect of omission of Rule being not treated as "repeal" saving the Acts done under the repealed provision by virtue of Section 6 of the General Clauses Act, 1897, in later judgments, but it seems that complete upto date research of the relevant case laws was not made by the learned counsels for the petitioners, and these were brought to the notice of the learned counsel for petitioners from Court side.
13. These two Constitutional Bench judgments were held to be on aforesaid issue in the later judgments in the cases of Fibre Boards Private Limited, Bangalore Vs. Commissioner of Income Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 49/97 Tax, Bangalore [(2015) 10 SCC 333] = 2015 376 ITR 596 and which was affirmed and followed in a still later decision of the Hon'ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills Vs. Commissioner of Central Excise and another [(2016) 3 SCC P.643]. The following extracts from these aforesaid two judgments quoted below after noticing the below quoted provisions of Sections 2 (19), 2(50), 2(51) 6, 6-A and 24 of the General Clauses Act, 1987.
2(19): "enactment" shall include a Regulation (as hereinafter defined) and any Regulation of the Bengal, Madras or Bombay Code, and shall also include any provision contained in any Act or in any such Regulation as aforesaid;
2(51): " rule" shall mean a rule made in exercise of a power conferred by any enactment, and shall include a Regulation made as a rule under any enactment;
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 50/97 2(50): "Regulation" shall mean a Regulation made by the President [under article 240 of the Constitution and shall include a Regulation made by the President under article 243 thereof and] a Regulation made by the Central Government under the Government of India Act, 1870, or the Government of India Act, 1915, or the Government of India Act, 1935.
6. Effect of repeal. - Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not -
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 51/97
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.
[6-A. Repeal of Act making textual amendment in Act or Regulation:-
Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 52/97 [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal]
24. Continuation of orders, etc., issued under enactments repealed and re-
enacted.-
Where any (Central Act) or Regulation, is, after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided any (appointment notification,) order, scheme, rule, form or bye- law, (made or ) issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force and be deemed to have been (made or) issued under the provisions so re- enacted, unless and until it is superseded by any (appointment, notification,) order, Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 53/97 scheme, rule, form or bye-law, (made or) issued under the provisions so re-enacted (and when any (Central Act) or Regulation, which, by a notification under Section 5 or 5A of the Scheduled Districts Act, 1874, (14 of 1874) or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn form the re- extended to such area or any part thereof, the provisions of such Act or Regulations shall be deemed to have been repealed and re- enacted in such area or part within the meaning of this Section).
14. The definitions of enactment, Rule, Regulation and Repeal from Mysore General Clauses Act, 1899 are also quoted below:
2(19): "enactment" shall include a Regulation (as hereinafter defined) and any Regulation of the Bengal, Madras or Bombay Code, and shall also include any provision contained in any Act or in any such Regulation as aforesaid;
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 54/97 2(51): " rule" shall mean a rule made in exercise of a power conferred by any enactment, and shall include a Regulation made as a rule under any enactment;
2(50): "Regulation" shall mean a Regulation made by the President [under Article 240 of the Constitution and shall include a Regulation made by the President under Article 243 thereof and] a Regulation made by the Central Government under the Government of India Act, 1870, or the Government of India Act, 1915, or the Government of India Act, 1935.
6. Effect of repeal. - Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not -
(f) revive anything not in force or existing at the time at which the repeal takes effect; or Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 55/97
(g) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
(h) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(i) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or
(j) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 56/97 [6-A. Repeal of Act making textual amendment in Act or Regulation:-
Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal]
15. The Hon'ble Supreme Court in the case of Fibre Boards Private Limited (supra) not only held that the view in the cases of M/s. Rayala Corporation (P) Ltd. and Kolhapur Canesugar Works Ltd. (supra) was not only an obiter dicta with regard to express omissions of enactment or Rule, but even an attempt made for referring the matter to the larger bench in the case of General Finance Company Vs. CIT (2002) 7 Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 57/97 SCC 1 was negatived by the Hon'ble Supreme Court in the case of Fibre Boards Private Limited (supra). The following extract from paragraphs 25 to 33 of the said judgment is quoted below for ready reference.
25. In Rayala Corpn. (P) Ltd., what fell for decision was whether proceedings could be validly continued on a complaint in respect of a charge made under Rule 132- A of the Defence of India Rules, which ceased to be in existence before the accused were convicted n respect of the charge made under the said Rule. The said Rule 132-A was omitted by a Notification dated 30-3- 1966. What was decided in that case is set out by para 17 of the said judgment, which is as follows: (SCC p.424) "17. Reference was next made to a decision of the Madhya Pradesh High Court in State of M.P. v. Hiralal Sutwala but, there again, the accused was sought to be prosecuted for an offence punishable under an Act on Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 58/97 the repeal of which Section 6 of the General Clauses Act had been made applicable. In the case before us, Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132-A of the DIRs for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule. If Section 6 of the General Clauses Act had been applied, no doubt this complaint against the two accused for the offence punishable under Rule 132-A of the DIRs could have been instituted even after the repeal of that Rule."
26. It will be clear fro a reading of this paragraph that the Madhya Pradesh High Court judgment was distinguished by the Constitution Bench on two grounds. One being that Section 6 of the General Clauses Act does not apply to a rule but only applies to a Central Act or Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 59/97 Regulation, and secondly, that Section 6 itself would apply only to a "repeal" not to "an omission." This statement of law was followed by another Constitution Bench in Kolhapur Canesugar Works Ltd. case. After setting out para 17 of the earlier judgment, the second Constitution Bench judgment states as follows: (SCC p.550, para
33) "33. In para 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v.
Karam Chand Thapar and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under Section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or regulation under an Act after its Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 60/97 repeal and re-enactment. In that case Section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principle laid down by the Constitution Bench in Rayala Corpn. case. In our considered view the ratio of the said decision squarely applies to the case on hand."
27. Kolhapur Canesugar Works Ltd. judgment also concerned itself with the applicability of Section 6 of the General Clauses Act to the deletion of Rules 10 and 10-A of the Central Excise Rules on 6-8-1977.
28. An attempt was made in General Finance Co. v. CIT to refer these two judgments to a larger Bench on the point that an omission would not amount to a repeal for the purpose of Section 6 of the General Clauses Act. Though the Court found substance in the argument favouring the reference to a larger Bench, ultimately it Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 61/97 decided that the prosecution in cases of non- compliance with the provision therein contained was only transitional and cases covered by it were few and far between, and hence found on facts that it was not an appropriate case for reference to a larger Bench.
29. We may also point out that in G.P. Singh's Principles of Statutory Interpretation, 12th Edn., the learned author has criticized the aforesaid judgments in the following terms:
"Section 6 of the General Clauses Act applies to all types of repeals. The section applies whether the repeal be express or implied, entire or partial or whether it be repeal simpliciter or repeal accompanied by fresh legislation. The Section also applies when a temporary statute is repealed before its expiry, but it has no application when such a statute is not repealed but comes to an end by expiry. The section on its own terms is limited to a repeal brought Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 62/97 about by a Central Act or Regulation. A rule made under an Act is not a Central Act or Regulation and if a rule be repealed by another rule, Section 6 of the General Clauses Act will not be attracted. It has been so held in two Constitution Bench decisions. The passing observation in these cases that "Section 6 only applies to repeals and not to omissions' needs reconsideration for omission of a provision results in abrogation or obliteration of that provision in the same way as it happens in repeal.
The stress in these cases was on the question that a 'rule' not being a Central Act or Regulation, as defined in the General Clauses Act, omission or repeal of a 'rule' by another 'rule' does not attract Section 6 of the Act and proceedings initiated under the omitted rule cannot continue unless the new rule contains a saving clause to that effect." (at pp.697-98).
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 63/97
30. In view of what has been stated hereinabove, perhaps the appropriate course in the present case would have been to refer the aforesaid judgment to a larger Bench. But we do not find the need to do so in view of what is stated by us hereinbelow.
31. First and foremost, it will be noticed that two reasons were given in Rayala Corpn. (P) Ltd. for distinguishing the Madhya Pradesh High Court judgment. Ordinarily, both reasons would form the ratio decidendi for the said decision and both reasons would be binding upon us. But we find that once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate legislation as it applies only to a Central Act or Regulation, it would be wholly unnecessary to state that on a construction of the word "repeal" in Section 6 of the General Clauses Act, "omission" made by the legislature would not be included. Assume, on the other hand, that the Constitution Bench had given two reasons for the non-
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 64/97 applicability of Section 6 of the General Clauses Act. In such a situation, obviously both reasons would be ratio decidendi and would be binding upon a subsequent Bench. However, once it is found that Section 6 itself would not apply, it would be wholly superfluous to further state that on an interpretation of the word "repeal", an "omission" would not be included. We are, therefore, of the view that the second so- called ratio of the Constitution Bench in Rayala Corpn. (P) Ltd. cannot be said to be a ratio decidendi at all and is really in the nature of obiter dicta.
32. Secondly, we find no reference to Section 6-A of the General Clauses Act in either of these Constitution Bench judgments. Section 6-A reads as follows:
" 6-A. Repeal of Act making textual amendment in Act or Regulation:-
Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 65/97 the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal]
33. A reading of this Section would show that a repeal by an amending Act can be by way of an express omission. This being the case, obviously the word "repeal" in both Section 6 and Section 24 would, therefore, include repeals by express omission. The absence of any reference to Section 6-A, therefore, again undoes the binding effect of these two judgments on an application of the per incuriam principle."
16. In a later case in the case of Shree Bhagwati Steel Rolling Mills (supra), it was again argued before the Hon'ble Supreme Court that the judgment in the Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 66/97 case of Fibre Boards Private Limited (supra) also requires reconsideration. But negativing the said contention and following its earlier view in the case of Fibre Boards Private Limited (supra), the Hon'ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills(supra) again reiterated the position relating to "repeal" and "omission" and "enactment"
including "Regulations" held as under:
"12. From this it is clear that when Section 6 of the General Clauses Act speaks of the repeal of any enactment, it refers not merely to the enactment as a whole but also to any provision contained in any Act. Thus, it is clear that if a part of a statute is deleted. Section 6 would nonetheless apply. Secondly it is clear, as has been stated by referring to a passage in Halsbury's Laws of England in Fibre Board judgment, that the expression "omission" is nothing but a particular form of words evincing an intention to abrogate an enactment or portion Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 67/97 thereof. This is made further clear by the Legal Thesaurus (Deluxe Edition) by William C. Burton, 1979 Edition. The expression "Delete" is defined by the Thesaurus as follows:
"Delete: - Blot out, cancel, censor, cross off, cross out, cut, cut out, dele, discard, do away with, drop, edit out, efface, elide, eliminate, eradicate, erase, excise, expel, expunge, extirpate, get rid of, leave out, modify by excisions, obliterate, omit, remove, rub out, rule out, scratch out, strike off, take out, weed, wipe out."
Likewise the expression "omit" is also defined by this Thesaurus as follows:-
"Omit: - Abstain from inserting, bupass, cast aside, count out, cut out, delete, discard, dodge, drop, exclude, fail to do, fail to include, fail to insert, fail to mention, leave out, leave undone, let go, let pass, let slip, miss, neglect, omittere, pass over, praetermittere, skp, slight, transpire."
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 68/97 And the expression "repeal" is defined as follows:
" Repeal: - Abolish, abrogare, abrogate, annul, avoid, cancel, countermand, declare null and void, delete, eliminate, formally withdraw, invalidate, make void, negate, nullify, obliterate, officially withdraw, override, overrule, quash, recall, render invalid, rescind, rescindere, retract, reverse, revoke, set aside, vacate, void, withdraw."
"13. On a conjoint reading of the three expressions "delete", "omit", and "repeal", it becomes clear that "delete" and "omit" are used interchangeably, so that when the expression "repeal" refers to "delete" it would necessarily take within its ken an omission as well. This being the case, we do not find any substance in the argument that a "repeal" amounts to an obliteration from the very beginning, whereas an "omission" is only in futuro. If the expression "delete" would amount to a "repeal", which the appellant's counsel does not deny, it is clear that a conjoint reading of Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 69/97 Halsbury's Laws of England and the Legal Thesaurus cited hereinabove both lead to the same result, namely, that an "omission" being tantamount to a "deletion"'' is a form of repeal."
21. It is settled law that Parliament is presumed to know the law when it enacts a particular piece of legislation. The Prevention of Corruption Act was passed in the year 1988, that is long after 1969 when the Constitution Bench decision in Rayala Corpn. had been delivered. It is, therefore, presumed that Parliament enacted Section 31 knowing that the decision in Rayala Corpn. had stated that an omission would not amount to a repeal and it is for this reason that Section 31 was enacted. This again does not take us further as this statement of the law in Rayala Corpn. is no longer the law declared by the Supreme Court after the decision in Fibre Board case.
23. Fibre Board case is a recent judgment which, as has correctly been argued by Shri Radhakrishnan, learned Senior Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 70/97 Counsel on behalf of the Revenue, clarifies the law in holding that an omission would amount to a repeal. The converse view of the law has led to an omitted provision being treated as if it never existed, as Section 6 of the General Clauses Act would not then apply to allow the previous operation of the provision so omitted or anything duly done or suffered thereunder. Nor may a legal proceeding in respect of any right or liability be instituted, continued or enforced in respect of rights, and liabilities acquired or incurred under the enactment so omitted. In the vast majority of cases, this would cause great public mischief, and the decision of Fibre Board case is therefore clearly delivered by this Court for the public good, being, at the very least a reasonably possible view. Also, no aspect of the question at hand has remained unnoticed. For this reason also we decline to accept Shri Aggarwal's persuasive plea to reconsider the judgment in Fibre Board case. This being the case, it is clear that on point one the present appeal would have to be Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 71/97 dismissed as being concluded by the decision in Fibre Board case.
17. The learned counsel for the Respondents-
Excise Department, Mr. N. Suresh has also brought to the notice of the Court that the Constitutional validity of the aforesaid Rule-14(2) of the 1968 Excise Rules was examined by the Division Bench of this Court in the case of State of Karnataka & Ors. Vs. Hotel Bangalore International Ltd., (ILR 2005 KAR 1397) and the same was upheld with the following observations:-
"7. Keeping in view the law governing the field and the dictum of the Apex Court, the controversy in the present case is to be examined. The respondents are CL-2 and Cl-9 licencees. These categories of licencees come in contact with public at large and offer liquor for sale. It is found that over the years, these licencees transacted a meagre business which is insufficient even to meet the prescribed licence fee. This clearly indicates Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 72/97 that there was purchase and sale of liquor clandestinely leading to evasion of huge amounts of excise duty. With an object to plug these loopholes and in the interest of State revenue and public interest, the excise Department collected details from various Districts and after thorough examination, notified the draft Rules on 21.6.2002, proposing to amend the Rules by insertion of Sub-rule (2) Rule 14, 14A and 14B of the Rules.
12. It is now well settled that Article 14 does not forbid reasonable clarification for the purpose of legislation. In the present case, among the various categories of licencees, it is CL-2 and CL-9 licencees who come into contact with public at large and offer liquor for sale. According to the information collected by the State, the business transacted by these categories of licencees is so meagre and insufficient even to meet the prescribed licence fee. This clearly indicates that there was purchase and sale of liquor clandestinely leading to evasion of huge amounts of excise duty. In order to plug these loopholes and Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 73/97 in the interest of revenue, the State under the impugned notification referred only CL-2 and CL-9 licencees and excluded the other categories of licencees. This classification by the State can neither be said to be arbitrary nor discriminatory. To achieve the object which is expedient, the State in its wisdom included the CL-2 and CL-9 licencees in the impugned notification. It is clear that the differentiation has a rational relation to the object sought to be achieved by the impugned notification. Therefore, the contention of respondents that the impugned notification is violative of Article 14 of the Constitution is liable to be rejected".
18. It may be noted here that the question of vires of the said Rule 14(2) of the Excise Rules of 1968 is not even under challenge again before this Court in this case, but the only question is, whether it's "omission" or "repeal" with effect from 01.08.2014 divests the Excise Authorities to invoke the said Rule and demand the penalty/damages for short lifting of the liquor from the Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 74/97 State Board Corporation for the period when the said Rule-14(2) on the Statute Book, between 01/04/2003 to 01/08/2014.
19. The learned Senior counsel for the petitioner Mr.K.P.Kumar upon the aforesaid later judgments in the case of Fibre Boards Pvt.Ltd., (supra) and Sri. Bhagavathi Steel Rolling Mills (supra) brought to his notice, submitted that even though the omission of the Rule may be treated as 'repeal' though in earlier cases in the cases of M/s.Rayala Corporation Pvt. Ltd., and Kolhapur Canesugar Works Ltd., it was held to be not amounting to repeal, still, the repeal of a Rule is not saved by applying Section 6 of the General Clauses Act, 1897, and the decisions of the Constitution Bench of Supreme Court in Rayala Corporation and Kolhapur Canesugar Works would still hold the field and govern the present case.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 75/97
20. The said contention is fallacious and not sustainable for the following reasons:-
Firstly, the repeal or omission in the case of Rayala Corporation and Kolhapur Canesugar Works Ltd. were also repeal of Rules only. Rule 132-A of the Defence of India Rules, 1962, relating to prosecution was omitted and Rule 10 and 10-A in the Central Excise Rules relating to recovery of excess refund or rebate was omitted in the case of Kolhapur Canesugar case. The decision of the Constitution Bench with regard to such 'omission' not amounting to 'repeal' has been held to be per incuriam or only obiter dicta in the later decisions in the case of Fibre Boards (2015) and Bhagawathi Steels (2016) and it has been categorically held that such omission of enactment would also amount to 'repeal' and Section 6 of the General Clauses Act would apply and save the action taken under the repealed provision, as discussed above.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 76/97 Secondly, levying of penalty/damages under Rule 14(2) of the State Excise Rules, 1968 in question, as contended by Mr.K.P.Kumar himself is that the said Rule is a charging provision and except the said Rule, there was no other provision for imposing the said penalty/damages for short lifting of liquor quantity. If it is a charging provision, as it appears to be, there is no reason to treat the 'Rule' 14(2) as anything different from a 'Section' or 'enactment' or a 'provision' covered by the scope of Section 6 of the General Clauses Act, 1897. It may also be noticed that in 1897, when India was not independent and no 'Rules' under delegated powers to the State Government were framed at that time therefore absence of word 'Rule' in Section 6 of the General Clauses Act, 1897 in the context of situation then obtaining should not allow the levy of Penalty/damages under Rule like Rule 14 (2) of present Excise Rules to lapse by holding that Section 6 of the General Clauses Act does not apply to Rules. It is only Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 77/97 after the State Re-organization Act, 1956 that States in India started enacting such Rules under their delegated powers under the relevant Acts.
Merely because it is a 'Rule' enacted by the State Legislature under the delegated powers under Section 71 of the Karnataka State Excise Act, 1965, it does not lose the legislative sanction and sustainability as a charging provision and its omission or repeal cannot deprive the Respondents-Excise Department to invoke and apply this provision by virtue of Section 6 of the General Clauses Act for demanding the penalty/damages for the short lifting of the liquor, for the period during which the said Rule 14 (2) existed on the Statute Book. The same will be clearly saved by virtue of Section 6 of the General Clauses Act, 1897 enacted much prior to independence of India even though the word 'Rule' is not separately mentioned in Section 6 of the Act. The Mysore General Clauses Act, 1899 includes 'Rules' within the definition of Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 78/97 'Enactment'. Therefore, despite some legislative gap for applying a saving clause to a charging provision, it cannot be allowed to fail, more so when the liability to pay pertains to a period when the said charging provision was very much on the Statute Book.
21. Therefore, this contention of the learned Senior counsel for the petitioner is held to be devoid of merit and the action of the Respondents-Excise Department for demand of such penalty/damages for compensating the loss of revenue caused to the State by such short lifting of liquor quantity cannot be held to be without jurisdiction or illegal.
22. It would be appropriate here to consider the judgment of the Hon'ble Supreme Court in the case of M/s. Guljag Industries Vs. Commercial Tax Officer and others [(2007 9 VST 1 (SC)] wherein the Hon'ble Supreme Court dealing with the case of levy of Penalty from the Consignors or Consignee or even Transporters for not Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 79/97 carrying on Declaration Form prescribed under the provisions of Section 78(2) of the Rajasthan Sales Tax Act for regulating the checking of the Transit movement of goods for sale. Paragraph 22 of the said judgment reads as hereunder:
22. There is dichotomy between contravention of section 78(2) of the said Act which invites strict civil liability on the assessee and the evasion of tax.
When a statement of import/export is not filed before the A.O. it results in evasion of tax, however, when the goods in movement are carried without the declaration form No.18A/18C then strict liability comes in, in the form of Section 78(5) of the said Act. Breach of section 78(2) imposes strict liability under section 78(5) because as stated above goods in movement cannot be carried without form No.18A/18C. We are not concerned with non-filing of statements before the A.O. We are concerned with the goods in movement being carried without supporting declaration forms. The object behind Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 80/97 enactment of Section 78(5) which gives no discretion to the competent authority in the matter of quantum of penalty fixed at 30 per cent of the estimated value is to provide to the State a remedy for the loss of revenue. The object behind enactment of section 78(5) is to emphasise loss of revenue and to provide a remedy for such loss. It is not the object of the said section to punish the offender for having committed an economic offence and to deter him from committing such offences. The penalty imposed under the said Section 78(5) is a civil liability. Willful consignment is not an essential ingredient for attracting the civil liability as in the case of prosecution. Section 78(2) is a mandatory provision. If the declaration form 18A/18C does not support the goods in movement because it is left blank then in that event section 78(5) provides for imposition of monetary penalty for non-compliance. Default or failure to comply with section 78(2) is the failure/default of statutory civil obligation and proceedings under section 78(5) are Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 81/97 neither criminal nor quasi-criminal in nature. The penalty is for statutory offence. Therefore, there is no question of proving of intention or of mens rea as the same is excluded from the category of essential element for imposing penalty. Penalty under section 78(5) is attracted as soon as there is contravention of statutory obligations. Intention of parties committing such violation is wholly irrelevant. Moreover, in the present case, we find that goods in movement carried with form No.18A/18C. The modus operandi adopted by the assessees itself indicates mens rea. This is not the case where goods in movement are carried without the declaration forms. In the present matter, as stated above, goods in movement were carried with the declaration forms. These forms were duly signed, however, material particulars were not filled in. The explanation given by the assessees in most of the cases is that they are not responsible for the misdeeds of the consignors. The other explanation given by the assessees is regarding the language Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 82/97 problem. There is no merit in these defences. They are excuses. The declaration forms were unfilled so that they could be used again and again. The forms were collected by the consignee from the said Department. The consignee undertakes to see that the value of the goods is supplied by the consignor. It is not open to the consignee to keep the column in respect of the description of goods as blank. Even the column dealing with nature of transaction is left blank. The consignee is the buyer of the goods. He knows the descriptions of the goods which he is supposed to buy. There is no reason for leaving that column blank. Therefore, there are no special circumstances in any case for waiver of penalty for contravention of section 78(2). The assessees were fully aware that the goods in movement had to be supported by form ST 18A/18C. Therefore, they made the goods travel with the forms. However, the said forms are left blank in all material respects. Therefore, A.O. was right in drawing inference of mens rea against the assessees. It has been repeatedly argued before us that Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 83/97 apart from the declaration forms the assessees possessed documentary evidence like invoice, books of accounts, etc., to support the movement of goods and, therefore, it was open to the assessees to show to the competent authority that there was no intention to evade the tax. We find no merit in this argument. Firstly, we are concerned with contravention of section 78(2) which requires the goods in movement to travel with the declaration in form 18A/18C duly filled in. It is section 78(2)(a) which has been contravened in the present case by the assessees by carrying the goods with blank forms though signed by the consignee. In fact, the assessees resorted to the above modus operandi to hoodwink the competent officer at the check-post. As stated above, if the form is left incomplete and if the description of the goods is not given then it is impossible for the assessing officer to assess the taxable goods. Moreover, in the absence of value/price it is not possible for the A.O. to arrive at the taxable turnover as defined under section 2(42) of the said Act. Therefore, we have Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 84/97 emphasized the words "material particulars"
in the present case. It is not open to the assessees to contend that in certain cases of inter-State transactions they were not liable in any event for being taxed under the RST Act, 1994 and, therefore, penalty for contravention of section 78(2) cannot be imposed. As stated hereinabove, declaration has to be given in form 18A/18C even in respect of goods in movement under inter- State sales. It is for contravention of section 78(2) that penalty is attracted under section 78(5). Whether the goods are put in movement under local sales, imports, exports or inter- State transactions, they are goods in movement, therefore, they have to be supported by the requisite declaration. It is not open to the assessee to contravene and say that the goods were exempt. Without disclosing the nature of transaction it cannot be said that the transaction was exempt. In the present case, we are only concerned with the goods in movement not being supported by the requisite declaration.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 85/97
23. This judgment really covers the controversy involved in the present case under Rule 14(2) of the Excise Rules of 1968.
24. The premise of Rule 14 (2) for recovering 'Loss of Revenue" to State caused by short lifting of liquor quantity, is in corollary to 'Penalty' recovered under Rule 21 (5) of MMDR (Mine & Mineral Development Regulations), wherein a recent decision rendered by Hon'ble Supreme Court only on 2nd August 2017, relying upon its previous decision in the case of Karnataka Rare Earth case (2004) 2 SCC 283 held that such compensation to State should be fully recovered even if illegal mining of ore, was done on any land, even if not covered by mining lease or Mining Plan.
This judgment is on all fours to the present case. The relevant extract from the said judgment in Common Cause Vs. Govt. of India and others (Writ Petition Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 86/97 (Civil) No.114/2014, decided on 2nd August 2017, is quoted below for ready reference:
"148. On behalf of the State of Odisha, it was submitted by Shri Rakesh Dwivedi learned senior counsel by relying upon Karnataka Rare Earth v. Senior Geologist, Department of Mines & Geology that what is sought to be achieved by Section 21(5) of the MMDR Act is to recover the price of the mineral that has been illegally or unlawfully or unauthorisedly raised with an intention to compensate the State for the loss of the mineral owned by it, the loss having been caused by a person who is not authorized by law to raise that mineral. There is no element of penalty involved in this and the recovery of the mineral or its price is not a penal action but is merely compensatory. This is what this Court had to say in Karnataka Rare Earth:
"12. Is the sub-section (5) of Section 21 a penal enactment? Can the demand of mineral or its price Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 87/97 thereunder be called a penal action or levy of penalty?
13. A penal statute or penal law is a law that defines an offence and prescribes its corresponding fine, penalty or punishment. (Black's Law Dictionary, 7th Edn., p.1421). Penalty is a liability composed (sic imposed) as a punishment on the party committing the breach. The very use of the term "penal" is suggestive of punishment and may also include any extraordinary liability to which the law subjects a wrong-doer in favour of the person wronged, not limited to the damages suffered. (See Aiyar P. Ramanatha: The Law Lexicon, 2nd Edn., p.1431).
14. In support of the submission that the demand for the price of mineral raised and exported is in the nature of penalty, the learned counsel for the appellants has relied on the marginal note of Section 21. According to Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 88/97 Justice Singh, G.P.: Principles of Statutory Interpretation (8th Edn., 2001, at p.147) though the opinion is not uniform but the weight of authority is in favour of the view that the marginal note appended to a section cannot be used for construing the section. There is no justification for restricting the section by the marginal note nor does the marginal note control the meaning of the body of the section if the language employed therein is clear and spells out its own meaning. In Director of Public Prosecutions v. Schildkamp, Lord Reid opined that a sidenote is a poor guide to the scope of a section for it can do no more than indicate the main subject with which the section deals and Lord Upjohn opined that a sidenote being a brief precis of the section forms a most unsure guide to the construction of the enacting section and very rarely it might throw some light on the Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 89/97 intentions of Parliament just as a punctuation mark.
15. We are clearly of the opinion that the marginal note "penalties"
cannot be pressed into service for giving such colour to the meaning of sub-Section (5) as it cannot have in law. The recovery of price of the mineral is intended to compensate the State for the loss of the mineral owned by it and caused by a person who has been held to be not entitled in law to raise the same. There is no element of penalty involved and the recovery of price is not a penal action. It is just compensatory."
149. We are in agreement with the view expressed by learned Attorney General and Shri Dwivedi as also the view expressed in Karnataka Rare Earth. The decision in Khemka & Co. is not at all apposite. There is no ambiguity in Section 21(5) of the MMDR Act or in its application. We are also of Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 90/97 opinion that though Section 21(1) of MMDR Act might be in the realm of criminal liability, Section 21(5) of the MMDR Act is certainly not within that realm.
150. In our opinion, Section 21(5) of the MMDR Act is applicable when any person raises, without any lawful authority, any mineral from any land. In that event, the State Government is entitled to recover from such person the mineral so raised or where the mineral has already been disposed of, the price thereof as compensation. The words 'any land' are not confined to the mining lease area. As far as the mining lease area is concerned, extraction of a mineral over and above what is permissible under the mining plan or under the EC undoubtedly attracts the provisions of Section 21(5) of the MMDR Act being extraction without lawful authority. It would also attract Section 21(1) of the MMDR Act. In any event, Section 21(5) of the Act is certainly attracted and is not limited to a violation committed by Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 91/97 a person only outside the mining lease area - it includes a violation committed even within the mining lease area. This is also because the MMDR Act is intended, among other things, to penalize illegal or unlawful mining on any land including mining lease land and also preserve and protect the environment. Action under the EPA or the MCR could be the primary action required to be taken with reference to the MCR and Rule 2(ii a) thereof read with the Explanation but that cannot preclude compensation to the State under Section 21(5) of the MMDR Act. The MCR cannot be read to govern the MMDR Act.
151. What is the significance of this discussion? It was submitted that the CEC has taken the following view:
" ..... it may be appropriate that 30% of the notional value of the iron and manganese produced by each of the lessees without/in excess of the environmental clearances may be directed to be recovered from the concerned lessees and with the Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 92/97 explicit understanding the concerned lessees as well as the officers will continue to be liable for action under the provisions of the respective Acts."
152. Learned counsel for the petitioners and the learned Amicus were of opinion that the provisions of Section 21(5) of MMDR Act requires that the entire price of the illegally mined ore should be recovered from each defaulting lessee. Similarly, in its affidavit, the Union of India differs with the recommendation of the CEC. According to the affidavit of the Union of India this would be contrary to the statutory scheme and in fact 100% recovery should be made under the provisions of Section 21(5) of the MMDR. We may note that only to this extent, the learned Attorney General differed with the view expressed by the Union of India and submitted that the recommendation of the CEC to recover only 30% of the value of the illegally mined ore should be accepted.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 93/97
153. In our opinion, there can be no compromise on the quantum of compensation that should be recovered from any defaulting lessee - it should be 100%. If there has been illegal mining, the defaulting lessee must bear the consequences of the illegality and not be benefited by pocketing 70% of the illegally mined ore. It simply does not stand to reason why the State should be compelled to forego what is its due from the exploitation of a natural resource and on the contrary be a party in filing the coffers of defaulting lessees in an ill gotten manner.
25. Thus while full compensation to State is realizable for illegal mining in areas other than the one covered by Mining Lease to full extent, besides criminal liability under Rule 21(1) of MMDR, as held by Hon'ble Apex Court, there is no reason, why a similar compensation for not lifting the prescribed quantity of liquor for the given period should not be recovered, Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 94/97 besides a consequence of cancellation of licence itself.
Thus, the latest judgment of Hon'ble Apex Court completely clinches the issue in favour of State in the present case as well.
26. From the above, it is clear that the reliance placed by the learned Senior Counsel for the petitioners on the earlier Constitution Bench decisions in the case of M/s. Rayala Corporation (P) Ltd. (supra) and Kolhapur Casesugar Works Limited (supra) is of little assistance to the case of the petitioners before this Court and the action taken against these petitioners with regard to Rule 14 (2) of the Excise Rules for a period prior to its omission on 01/08/2014 is justified and the said demand of Penalty/fiscal liability cannot be struck down on the basis of the aforesaid contention raised on behalf of the petitioners.
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 95/97
27. This Court is further of the view that the said fiscal liability in the name of Penalty under Rule 14 (2) of the Excise Rules of 1968 is actually the price or the liquidated damages to be paid by the Excise Licencees or 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. That is why there is no need to go into the question of mens rea or opportunity of hearing or raising an objection in that regard was considered appropriate in the aforesaid case in Lakshmi Bar and Restaurant case (supra), decided by this Court on 27/06/2017 and the requirement of giving such opportunity wherein Rule 14(2) was restricted in the case where the licence itself was sought to be cancelled for the said reason of short-lifting of the liquor.
28. This Court also does not find any merit in the contention No.III that measure of Penalty under Rule 14 (2) cannot be assailed on different price range for Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 96/97 different types of liquor. It is for the Legislature to adopt such measure and no illegality or arbitrariness is seen in such a measure adopted in Rule 14(2) in the present case.
29. This Court has also noticed that in none of the cases, the petitioners have even raised any such objections or reasons for such short lifting of liquor.
Had it been so raised, the authority concerned of the Excise Department could have been expected to pass appropriate orders in this regard. Having not done that, the petitioners cannot be permitted to raise the said plea of alleged breach of principles of natural justice to get the demand notices quashed on the said ground.
30. Having said as above, this Court is of the view that while upholding the levy, about its mathematical computation and assessment, the petitioners can be given even now an opportunity of hearing. Therefore, the Respondent authorities are directed to pass Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters M/s. High Point Hotels Pvt. Ltd., and others Vs. The Excise Commissioner in Karnataka and others 97/97 speaking adjudication orders, in cases where Objections are now filed about the quantum of penalty and damages under Rule 14 (2) of the Excise Rules of 1968, within a period of one month from today. However, no objection as to the very levy shall be entertained by them. The petitioners are permitted to file such Objections within one month from today and thereafter a period of two months is allowed to the respective authorities to pass such orders thereon. No extension of time would be permitted to any of the parties in this regard.
31. Petitions are accordingly disposed of with aforesaid observations. No order as to costs.
Sd/-
JUDGE BMV*/Srl