2015 (8) TMI 999 - SC - VAT and Sales Tax

Denial of refund claim - abkari business - Amount paid in addition to renewal fees of FL-3 License - Held that - Appellant is not entitled to receive refund of ₹ 50 Lacs on account of subsequent deposit of required percentage of principal dues under the Amnesty Scheme of 2008. The amnesty earned in 2008 must be confined to the arrears of interest outstanding at the relevant time in 2008 and by that date the earlier deposits of ₹ 50 Lacs had already been appropriated towards interest. No fault can be found in appropriating that amount because there is no dispute regarding the actual outstanding amounts of principal and interest which clearly find mention in the certificate dated 10.11.2008 to I.A. No.1 on which appellant itself has placed reliance. - since there was no challenge to the proviso to Rule 13A(5) of the Foreign Liquor Rules, the respondents were well within their legal rights to insist that at least 50% of the excise dues against the partners of the appellant was required to be paid in accordance with the proviso, to get the desired renewal. Such decision of the High Court in our considered view does not require any interference. Factum of excise dues of one of the partners of the appellant and its subsequent payment under the Amnesty Scheme is not in dispute or controversy. This is apparent from the certificate dated 10.11.2008. Though large part of the interest amounting to several crores could not be recovered but that was on account of grace shown by the Government itself by formulating the Amnesty Scheme of 2008. In such circumstances exercise of writ jurisdiction to help the defaulter would be inappropriate. It would be unjust to direct for refund of ₹ 50 Lacs on the premise that its recovery in the manner made is being questioned by the appellant. - Decided against assessee.

Summary

Issues:
Interpretation of proviso to Rule 13A(5) of the Foreign Liquor Rules in Kerala, liability of a partnership firm for abkari arrears, entitlement to refund of deposited amount under Amnesty Scheme, application of Indian Partnership Act, 1932.

Analysis:
1. The main issue in this case revolves around the interpretation of the proviso to Rule 13A(5) of the Foreign Liquor Rules in Kerala, specifically concerning the renewal of a license for a partnership firm. The proviso states that no defaulter of abkari arrears due to the Government shall be allowed to renew the license unless 50% of the arrears are cleared. The appellant partnership firm's license renewal was initially rejected due to one of the partners having outstanding dues from conducting abkari business in the past.

2. The court examined the liability of the partnership firm for the abkari arrears and the legal implications of one partner's default affecting the entire firm's renewal eligibility. The High Court had ruled that a partnership firm cannot claim a separate juristic identity and renewal could not be granted if any partner had outstanding liabilities. The Division Bench upheld this decision, emphasizing that the default of one partner can impact the entire firm's status as a defaulter under the relevant rule.

3. The appellant sought a refund of the deposited amount of Rs. 50 Lacs following the Amnesty Scheme of 2008, where 75% of the principal dues were paid to waive off the remaining dues, penalties, and interest. The court analyzed the appropriation of the deposited amount towards interest under the Amnesty Scheme and found that the earlier deposits had already been utilized for this purpose, as per the rules. The court held that the appellant was not entitled to a refund of the deposited amount based on subsequent developments.

4. Regarding the application of the Indian Partnership Act, 1932, the court clarified that the partnership's liability arises from a contract and not from status. The Act stipulates the payment of firm debts and partners' separate debts, with provisions for the allocation of liabilities. The court affirmed that the partners, other than the defaulting one, could seek redress for any losses incurred due to the defaulting partner's actions.

5. Ultimately, the court dismissed the appeal, stating that the appellant must redeposit the amount of Rs. 50 Lacs to meet its liability under the security furnished as per the court's earlier order. The appellant was directed to do so within six weeks, along with interest at the rate of 6% per annum. No costs were awarded in the case.