2017 (8) TMI 505 - HC - VAT and Sales Tax

Penalty - Section 61 (1) (aaa) and C (i) of the Act of 1914 - principles of Natural Justice - request of the representative of the petitioners for an adjournment was rejected - Smuggling - Held that - Section 61 (1) (aaa) and C (i) of the Act of 1914 stipulates that import, export, transport or possession of liquor in contravention of the Act, rules or licence would invite penalty of not less than ₹ 50 and not more than ₹ 500 per bottle of 750 mili litres or part thereof. Thus minimum penalty of ₹ 50 per bottle can be imposed for minor violation while in cases of grave or serious nature the penalty upto ₹ 500 per bottle can be levied. Request for adjournment was sought on the ground of the Accounts Manager being on leave. We do not find that such a request at the very first instance is such which would merit outright rejection. It is possible that the petitioners were merely buying time and wanted to delay the matter. However, it is equally possible that they wanted to prepare adequate defence after examining the accounts. It would thus be difficult to conclude with absolute certainty as to whether the request was bona fide or a ruse to delay the proceedings. We are nevertheless of the view that some time should have been granted if the request for adjournment had been made. It was the first request and granting some time even of a few days would not have affected the proceedings. Declining the request on the first date itself would not be in consonance with the principles of natural justice. This is more so when the maximum penalty of ₹ 500/- per bottle has been imposed upon the petitioners. The oral statements of the driver and others and various documents are being relied upon by the authorities without any reply thereto which has certainly prejudiced the petitioners. The case is remanded to the Collector to decide afresh within three months after granting opportunity to petitioners to file reply - appeal allowed by way of remand.

Summary

Issues Involved:
1. Quashing of the penalty order dated 26.09.2014.
2. Dismissal of the appeal and review application by the Excise and Taxation Commissioner.
3. Adequate opportunity of hearing and principles of natural justice.
4. Interpretation of Section 61(1)(aaa) of the Punjab Excise Act, 1914.
5. Compliance with Rule 5 of the Haryana Imposition and Recovery of Penalty Rules, 2003.
6. Control and responsibility of the Excise Department over distilleries.

Detailed Analysis:

1. Quashing of the Penalty Order Dated 26.09.2014:
The petitioners sought quashing of the penalty order dated 26.09.2014, wherein a penalty of ?27,30,000/- was imposed by the Collector-cum-Deputy Excise & Taxation Commissioner (Excise), Sonepat. The penalty was based on the detection of a consignment of IMFL without a permit or pass, leading to the seizure of 550 cases of liquor. The Collector held the petitioners, along with others, jointly and severally liable and imposed the maximum penalty of ?500 per bottle.

2. Dismissal of the Appeal and Review Application:
The petitioners' appeal and review application were dismissed by the Excise and Taxation Commissioner, Haryana, vide orders dated 30.04.2015 and 26.05.2016, respectively. The petitioners challenged these dismissals in the instant petition.

3. Adequate Opportunity of Hearing and Principles of Natural Justice:
The petitioners contended that they were not afforded adequate opportunity of hearing, resulting in a violation of the principles of natural justice. The request for adjournment by the petitioners' representative was rejected without a valid ground. The court emphasized that an order with penal consequences cannot be passed without affording an opportunity of hearing. It was noted that the first request for adjournment should not have been outrightly rejected, especially when the maximum penalty was imposed.

4. Interpretation of Section 61(1)(aaa) of the Punjab Excise Act, 1914:
Section 61(1)(aaa) stipulates that import, export, transport, or possession of liquor in contravention of the Act invites a penalty of not less than ?50 and not more than ?500 per bottle. The petitioners argued that the penalty could not be imposed unless the liquor was seized from their possession. The court noted that the petitioners' liability needed to be examined in light of the control exercised by the Excise Department over the distillery.

5. Compliance with Rule 5 of the Haryana Imposition and Recovery of Penalty Rules, 2003:
Rule 5 provides that the Collector shall serve notice to the alleged offender to attend the proceedings not later than 7 days. The court interpreted this rule as directory, allowing for more time to be granted in appropriate cases. The court highlighted that denying any further time could lead to arbitrary actions by the authorities and emphasized the need for adherence to the principles of natural justice.

6. Control and Responsibility of the Excise Department Over Distilleries:
The petitioners argued that the distillery's functioning is under the control of the Excise Department, and no product can be removed without authorization. The court noted that the petitioners' defense, including the role of the Excise Department and the absence of irregularities in periodic inspections, needed to be considered by the Excise Authorities after granting adequate opportunity to submit a reply.

Conclusion:
The court allowed the petition, setting aside the impugned orders dated 26.09.2014, 30.04.2015, and 26.05.2016. The case was remanded to the Collector to decide afresh within three months after granting the petitioners an opportunity to file a reply. The court emphasized that nothing observed in the judgment would affect the merits of the case.