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2019 (12) TMI 622 - HC - VAT and Sales TaxLicense or permission to conduct business of Online Order processing and Delivery of Indian and Foreign Liquor including Beer, Wine and Low Alcoholic Beverages - cancellation of Letter of Authority without issuing SCN - Karnataka Excise Act, 1965. Whether the petitioner require any licence or permission to conduct business of online order processing and delivery of liquor to the consumer in the state of Karnataka? - Regulation of trade or business in liquor - HELD THAT - The fundamental right to carry on the present business claimed by the petitioner on the premise i.e., sale of liquor is not res extra commercium and the right under Article 19 (1) (g) of Constitution exists is not absolute but subject to the State permitting to undertake the business. Business of liquor stands on a different footing from other trades, the State possesses the right of control over all aspects of intoxicants. Imposing fetters or restrictions by the State is mandatory though there is no prohibition policy in the State. In such circumstances, a right is vested with the State to monitor, regulate, and prevent from conducting the activities/trade in liquor. Any such restriction imposed on the petitioner to achieve the laudable object of the Act, 1965 cannot be termed as an infringement of fundamental right guaranteed under Article 19(1) (g) of the Constitution of India - the arguments of the learned senior counsel that Articles 14 and 19(1) (g) are infringed by the act of the State is untenable. Transaction of petitioner whether is sale of liquor - HELD THAT - Ordinarily, the essential elements to constitute a sale are (i) parties competent to contract (ii) mutual consent, (iii) transfer of property in the goods from the seller to the buyer, and (iv) a price in money paid or promised. As per Section 4 Sale of Goods Act, 1930 where under a contract of sale, the property in the goods is transferred from the seller to the buyer, the contract is called as sale - In the present set of facts, the petitioner is placing orders on the CL-2 licence holders to supply required quantity of liquor on payment basis and in turn sells the same to the person who is an end consumer by receiving the amount which is more than the MRP fixed by the CL-2 licence holder in the pretext of service charges. In terms of Act, 1965 any transfer otherwise than by way of gift being 'sale', the transaction of the petitioner certainly comes under the term 'sale', as such the provisions of the Act, 1965 are applicable. Transportation of liquor - HELD THAT - The State has prescribed the permissible quantity in terms of Rule 21 of the Excise (Possession, Transport, Import and Export) Rules, 1967. The said rule does not provide for delivery/transport of liquor beyond the limits prescribed therein. It is the contention of the petitioner that it does not facilitate delivery/transport of liquor beyond the limits prescribed in Rule 21 of the Rules, 1967. Section 12 of the Act, 1965 provides for permits relating to transport - If the interpretation given by the petitioner to be accepted, in each and every case, where the quantity of liquor requires a permit to possess or transport can easily be divided into small quantities in order to escape the rigor of the Act, 1965 and the Rules which would defeat the purport and object of the Act, 1965. Possessing and transporting of liquor by the petitioner to various end customers is not saved under Rule 21 of the Rules, 1967. Revocation of loa - HELD THAT - On trial and experimental basis, LOA was issued which was not in conformity with the provisions of the Act. On realizing the mistake, the same has been withdrawn at its own discretion in the interest of the stake holders and the public at large. Any LOA issued by the respondent without jurisdiction is non est in the eye of law. Source of power to issue LOA is not traceable to any of the provisions under the Act, 1965. Standard of morality - HELD THAT - There are various types of licences one needs to have to store/manufacture/sell/possess/transport. Hence, it is illegal if any sale or purchase is made through any other mode than prescribed under the Act, 1965 in Karnataka. It is only the licence holders who are entitled to sell the liquor. There is prescribed timings permitted for sale of liquor but the petitioner may engage in 24x7 delivery through online. E-commerce trade with other goods can not be compared with the sale of liquor through online. Under the Act, 1965 and Rules, no online sale is permitted. As such, any transaction of liquor through online made by the petitioner in contravention of the provisions of the Act and Rules is illegal. Whether issuing a writ of mandamus to the respondent not to interfere with the petitioner's business relating to liquor is warranted in the circumstances of the case? - HELD THAT - It is settled law that writ of mandamus cannot be granted unless the existing legal right of an applicant or an existing duty of the respondent has been established. The writ cannot be issued to create or establish a legal right, but to enforce that stood already established - The petitioner is neither a licensee under the provisions of the Act, 1965 to carry on trade in liquor nor has a legal right under the statute to enforce its performance. Unless the legal right is established, corresponding legal duty imposed under the statute cannot be invoked. No prohibition for liquor in the State would not mean absolute liberty to deal in liquor trade. The business model of the petitioner cannot be held that it does not require authorization under any of the provisions of the Act, 1965. The petitioner taking shelter under the PSS Act cannot give a go-bye to the provisions of the Act, 1965. Indeed, the Act, 1965 do not permit home delivery of alcohol either for oneself or as an agent of another. Hence, no writ of mandamus can be issued as prayed. The petitioner is not entitled to carry on business of online order processing and delivery of liquor to the consumers in the State of Karnataka in the absence of enabling provision available under the Karnataka Excise Act, 1965 to grant such licence or permission. Petition dismissed - both the questions framed are answered against the petitioner.
Issues Involved:
1. Requirement of license or permission for conducting online order processing and delivery of liquor. 2. Issuance of writ of mandamus to prevent interference in the petitioner's business. 3. Regulation of trade or business in liquor. 4. Transaction of the petitioner as sale of liquor. 5. Transportation of liquor. 6. Revocation of Letter of Authority (LOA). 7. Standards of morality in liquor trade. 8. Writ of mandamus and its applicability. Detailed Analysis: 1. Requirement of License or Permission: The court examined whether the petitioner needed a license or permission to conduct online order processing and delivery of liquor in Karnataka. It was concluded that the State has exclusive rights over the regulation of liquor trade under the Karnataka Excise Act, 1965. The petitioner's business model, involving the sale and delivery of liquor, required compliance with the Act, which does not permit online sale or home delivery of liquor. Therefore, the petitioner needed appropriate licenses under the Act. 2. Issuance of Writ of Mandamus: The petitioner sought a writ of mandamus to prevent the respondent from interfering with its business. The court noted that a writ of mandamus can only be issued to enforce an existing legal right or duty. The petitioner did not have a legal right under the Karnataka Excise Act, 1965, to carry on the trade of liquor without proper authorization. Thus, the court denied the issuance of a writ of mandamus. 3. Regulation of Trade or Business in Liquor: The court emphasized that the State has the authority to regulate the trade of liquor under Article 47 of the Constitution and the Karnataka Excise Act, 1965. The regulation is crucial for public health and safety. The court referred to the Supreme Court's judgment in Kerala Bar Hotels Association v. State of Kerala, which upheld stringent restrictions on liquor trade as reasonable and necessary. 4. Transaction of the Petitioner as Sale of Liquor: The court analyzed whether the petitioner's transactions constituted the sale of liquor. It concluded that the petitioner's activities, including placing orders with licensed vendors and delivering liquor to consumers, amounted to a sale under the Karnataka Excise Act, 1965. The petitioner’s argument that it was merely a facilitator was rejected, as the transaction involved the transfer of property in goods for a price. 5. Transportation of Liquor: The court examined the transportation of liquor by the petitioner. It was found that the petitioner’s activities exceeded the permissible limits under Rule 21 of the Excise (Possession, Transport, Import and Export) Rules, 1967. The continuous, frequent, and voluminous transportation of liquor by the petitioner was not covered under the rule, making it illegal. 6. Revocation of Letter of Authority (LOA): The petitioner argued that the revocation of the LOA was arbitrary. The court held that the LOA was issued contrary to the provisions of the Karnataka Excise Act, 1965, and its revocation was within the respondent's discretion. The LOA had no legal standing as it was not backed by statutory provisions. 7. Standards of Morality in Liquor Trade: The court acknowledged the social and moral implications of liquor trade. It emphasized the importance of regulating liquor consumption, especially among the younger generation, and upheld the State’s right to impose restrictions to protect public health and morality. 8. Writ of Mandamus and Its Applicability: The court reiterated that a writ of mandamus cannot be issued to create a legal right but only to enforce an already established one. Since the petitioner did not have a legal right to conduct online liquor trade without proper authorization, the writ was not applicable. Conclusion: The court concluded that the petitioner was not entitled to conduct online order processing and delivery of liquor in Karnataka without the necessary licenses and permissions under the Karnataka Excise Act, 1965. Both questions framed were answered against the petitioner, and the writ petition was dismissed with no order as to costs.
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