2023 (9) TMI 1187 - HC - VAT and Sales Tax

Recovery of penal interest - Violation of principles of natural justice - impugned order of recovery of interest has been passed without hearing the petitioner - non-renewal of license of Excise vends - HELD THAT - It is not the respondents case that the licence gets automatically renewed without its cancellation or suspension, therefore, for the period of three financial years from 1995-1998, the petitioner having no licence to run the business of liquor, it was not liable to pay the licence fee for that period. It seems that the petitioner under the hope and expectations that his application for shifting of his business from Link Road to Bus Stand, Jammu shall be considered which was ultimately allowed by the respondents had paid an amount of ₹8.50 lacs as licence fee for that period besides an amount of ₹6.00 lacs deposited earlier in terms of Court s order. The petitioner, has thus, deposited the amount of ₹14.50 lacs on account of licence fee and on withdrawal of his petition and till then interim order passed by this Court was operating which had conditioned that the petitioner shall pay an amount of ₹6.00 lacs and remaining amount shall be payable after the disposal of the writ petition. The impugned communication requiring the petitioner to remit penal interest of ₹14.49 lacs in terms of Section 24-A of the J K Liquor Licence and Sales Rules, 1984 can be ordered to be deposited only on non-payment of the licence fee. Since the licence fee had been deposited by the petitioner in terms of the Court order, the same cannot be said to be a delayed payment so as to incur the penal consequences of paying interest in terms of Section 24-A of the J K Excise Act. Rule 20 of the J K Liquor Licence and Sales Rules, 1984 provided that licence unless renewed is determined on 31st March at the end of the financial year. Petition allowed.

Issues Involved:
1. Enhancement of Licence Fee and its Impact on Business Viability
2. Shifting of Premises and Payment of Outstanding Licence Fee
3. Challenge to SRO-68 and Government Orders
4. Demand for Penal Interest and Legal Grounds for Contesting It
5. Applicability of Excise Act vs. GST Act
6. Non-Renewal of Licence and its Legal Consequences
7. Comparison with Similar Cases and Government Policy on Amnesty

Summary:

1. Enhancement of Licence Fee and its Impact on Business Viability:
The petitioner, M/S Wine Centre, a licence holder of Vend No. 80-OFF at Link Road, Jammu, contended that the enhancement of the licence fee from Rs. 50,000/- to Rs. 5.00 lacs by SRO-68 rendered the business non-viable, leading to the closure of the shop from 1995 to 1997.

2. Shifting of Premises and Payment of Outstanding Licence Fee:
The petitioner applied to shift the premises from Link Road to Bus Stand, Jammu. This was permitted on the condition of clearing outstanding licence fees for 1995-96 to 1997-98. The petitioner challenged this condition in OWP No. 298/1997, and the interim order directed the petitioner to deposit Rs. 6.00 lacs with the Excise Commissioner.

3. Challenge to SRO-68 and Government Orders:
The petitioner's challenge to SRO-68 was disposed of with a directive to seek relief from the Excise Commissioner. The government later issued Order No. 123-F of 1998, setting a uniform licence fee of Rs. 3.00 lacs and allowing recovery in installments with interest, but this did not resolve the petitioner's issues.

4. Demand for Penal Interest and Legal Grounds for Contesting It:
The petitioner received a notice to pay penal interest of Rs. 14,49,000/-. The petitioner contested this on grounds that no Demand Notice had been served as required under Section 8(2) of the General Sales Tax Act, and that the interest could not be claimed from the date the tax was due.

5. Applicability of Excise Act vs. GST Act:
The respondents argued that the GST Act provisions were not applicable to Excise Tax and that the penal interest was an additional sum under Section 24-A of the Excise Act. The petitioner countered that the licence had expired and was not renewed, thus no fee or interest was payable.

6. Non-Renewal of Licence and its Legal Consequences:
The petitioner's licence expired on 31.03.1995 and was not renewed. The petitioner argued that without renewal, there was no obligation to pay licence fees for 1995-96, 1996-97, and 1997-98. The court agreed, noting that the licence stood determined in the absence of renewal.

7. Comparison with Similar Cases and Government Policy on Amnesty:
The petitioner cited a similar case of M/S Kundal Brothers Wine Shop, where no licence fee was demanded for the period of non-renewal. The court found that the petitioner had deposited Rs. 14.50 lacs under duress and that the demand for penal interest was unjustified.

Conclusion:
The court quashed the impugned Demand Notice No. 1251-53/CRS dated 17.03.2003, stating that since the licence fee had been deposited as per court orders, no penal interest under Section 24-A of the J&K Excise Act was applicable. The petition was allowed, and no costs were imposed.

← Previous Next →