2016 (9) TMI 222 - HC - Customs

Validity of the demand for the period prior to the deletion of Rule 6-C of the Rules, 1989 - deletion of rule of Section 6-C to the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 - Notification dated 20th May, 2002, published in Orissa Gazette on 6th July, 2002 - Held that - the actual repeal of Rule 6-C of the Rules, 1989 did take place vide Notification dated 30.05.2002 but, much prior thereto i.e. 31.03.2001, the State Government had created a State monopoly of wholesale trade for distribution of foreign liquors i.e. OSBC. Since no demand of the alleged shortfall of MGQ had ever been raised prior to 30th May, 2002, the date of which the State of Orissa deleted Rule 6-C from the Rules, 1989 and first time the demand was raised only on 27th December, 2002 effectively much after the date of repeal/deletion - Demand after the date of deletion not justified - demand of the alleged shortfall of MGQ dated 27th December, 2002 quashed.

Summary

Issues:
1. Validity of repealing Rule 6-C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989.
2. Enforceability of demands raised prior to the deletion of Rule 6-C.
3. Impact of the creation of a State monopoly on wholesale trade and distribution of foreign liquor on existing rules and demands.

Issue 1: Validity of repealing Rule 6-C
The judgment delves into the question of whether the repeal of Rule 6-C to the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 was legally permissible. The petitioners argued that the repeal of a statute or deletion of a provision obliterates it from the statute book, rendering proceedings pending under it discontinued. They cited a Division Bench judgment and a Supreme Court case to support their stance. The Court agreed that the repeal of Rule 6-C was valid, as it was deleted through a notification dated 30th May, 2002, without any saving clause for continuation of proceedings under the rule.

Issue 2: Enforceability of demands raised pre-deletion of Rule 6-C
The judgment also addressed whether demands raised prior to the deletion of Rule 6-C could be validly enforced thereafter. The State contended that since the rule was deleted only in 2002, demands based on it were justified. However, the Court noted that the State had established a monopoly wholesaler for liquor trade in January 2001, which rendered the rule's enforcement impractical. The Court emphasized that demands raised after the deletion of the rule could not invoke the old rule, thereby quashing the demand raised on 27th December 2002 for outstanding dues related to the MGQ.

Issue 3: Impact of State monopoly on existing rules and demands
The judgment highlighted the impact of the creation of a State monopoly on wholesale trade and distribution of liquor on existing rules and demands. The State had vested the exclusive authority for liquor trade in the Orissa State Beverage Corporation Ltd. in 2001. This monopoly limited the licensees' ability to deal with other retailers or wholesalers. Subsequently, the State repealed Rule 6-C in 2002, recognizing the practical implications of the monopoly on existing demands. The Court concluded that demands raised post-repeal, like the one in this case, could not be upheld, as they were based on a rule that was no longer in force. Consequently, the Court quashed the demand for outstanding MGQ dues raised in 2002, post the rule's deletion.

This comprehensive analysis of the judgment provides a detailed insight into the legal intricacies surrounding the validity of repealing a rule, enforceability of demands post-repeal, and the impact of regulatory changes on existing obligations in the context of liquor trade regulations in Orissa.