1974 (1) TMI 116 - HC - Central Excise

Summary

Issues Involved:
1. Recovery of issue price for unlifted liquor quota.
2. Validity and interpretation of Rule 15 of the Andhra Pradesh Excise (Arrack Retail Vend Special Conditions of Licenses) Rules, 1969.
3. Applicability of Section 74 of the Indian Contract Act.
4. Inclusion of excise duty in the issue price.
5. Remedies available to the Government for recovery of damages.

Detailed Analysis:

1. Recovery of Issue Price for Unlifted Liquor Quota:
The primary issue was whether the Government could recover the issue price for the unlifted quota of liquor after the contractual period ended. The petitioner argued that there was no provision to collect the issue price for the unlifted quota after the contract period, asserting that the only remedy was under Rule 15 of the Retail Vend Rules, which limits recovery to the amount of deposit made.

2. Validity and Interpretation of Rule 15:
Rule 15 of the Retail Vend Rules was central to the dispute. The court examined various provisions of the Andhra Pradesh Excise Act, 1968, and the Retail Vend Rules. It was concluded that Rule 15 allows the Government to adjust the issue price of the short-lifted quota from the advance money during the contract period. However, the court clarified that Rule 15 is not the exclusive remedy and does not preclude the Government from recovering damages after the contract period. The word "shall" in Rule 15(1) was interpreted as permissive rather than obligatory, allowing the Government to recover damages even after the contract ended.

3. Applicability of Section 74 of the Indian Contract Act:
The court discussed Section 74 of the Indian Contract Act, which deals with the compensation for breach of contract where a penalty is stipulated. The court held that the issue price for the short-lifted quota is a form of liquidated damages. It was emphasized that Section 74 allows for reasonable compensation not exceeding the stipulated amount, even if no actual loss is proven. The court referred to various precedents to support this interpretation, concluding that the Government could recover liquidated damages under Section 74.

4. Inclusion of Excise Duty in the Issue Price:
The court addressed whether excise duty is included in the issue price. It was determined that excise duty, along with the cost of arrack and sales tax (except in cases where no sales occurred), constitutes the issue price. The court clarified that excise duty is imposed on the manufacture or production of liquor and can be collected at various stages, including when issued from the distillery. Therefore, excise duty is part of the liquidated damages recoverable by the Government.

5. Remedies Available to the Government for Recovery of Damages:
The court examined the remedies available to the Government for recovering damages for the short-lifted quota. It was concluded that the Government could use the provisions of the Revenue Recovery Act for such recovery. Section 65 of the Andhra Pradesh Excise Act allows the Government to recover amounts due as arrears of land revenue. The court also noted that the Government could set off its claim against any deposit or advance money held. It was clarified that the Government need not file a civil suit for recovery, and the burden of proving that the stipulated sum is a penalty lies on the defaulting party.

Conclusion:
The court dismissed all writ petitions, upholding the Government's right to recover the issue price for the short-lifted quota as liquidated damages. The remedies under the Revenue Recovery Act were deemed valid, and the court emphasized the permissive nature of Rule 15, allowing for recovery beyond the contract period. The inclusion of excise duty in the issue price was affirmed, and the applicability of Section 74 of the Indian Contract Act was clarified, supporting the Government's right to reasonable compensation for breach of contract.