2005 (1) TMI 734 - HC - Central Excise

Summary

Issues:
1. Validity of the amendment to the Karnataka Excise Rules regarding minimum quantity of liquor to be lifted per month by CL-2 and CL-9 licensees.
2. Compliance with procedural requirements in issuing the impugned notification.
3. Constitutionality of the amendment in relation to Article 19(g) and Article 14 of the Constitution.

Analysis:

Issue 1: Validity of the amendment
The Government of Karnataka amended the Karnataka Excise Rules by inserting Sub-rule (2) of Rule 14, 14A, and 14B, requiring CL-2 and CL-9 licensees to lift a minimum quantity of liquor per month. The amendment aimed to address clandestine transactions and evasion of excise duty. The State considered objections and issued the final notification on 1.4.2003. The High Court found that the State had duly considered objections and followed the procedure under Section 71 of the Act. The amendment was deemed necessary to safeguard State revenue and public interest, thus justifying the differentiation made in including only CL-2 and CL-9 licensees in the notification.

Issue 2: Compliance with procedural requirements
The respondents argued that the State did not consult the Department of Law as required by the Karnataka Government (Transaction of Business) Rules, 1977. However, the Court held that the consultation requirement was not mandatory in this case, and the State had followed the prescribed procedure by inviting objections, considering them, and issuing the final notification. The Court found that the objections were duly considered, even though reasons for rejection were not explicitly recorded, and concluded that the procedure was followed.

Issue 3: Constitutionality of the amendment
The respondents contended that the amendment, requiring CL-2 and CL-9 licensees to lift a minimum quantity of liquor per month, violated Article 19(g) and Article 14 of the Constitution. However, the Court referenced previous Supreme Court judgments which established that citizens have no fundamental right to trade in intoxicating liquors. The differentiation made in the impugned notification was found to be rational and not discriminatory, as it aimed to address specific issues related to certain categories of licensees. Therefore, the Court rejected the contention that the amendment was unconstitutional.

In conclusion, the High Court allowed the appeals by the Government of Karnataka, set aside the previous judgment, and dismissed the writ petitions challenging the amendment to the Karnataka Excise Rules.