2021 (2) TMI 4 - HC - Indian Laws

Maintainability of petition - Jurisdiction - liquor shop license - power of licensing authority to cancel both the licenses of the petitioner without any prior notice proposing to cancel the Majhenpurwa license. Maintainability of petition - HELD THAT - The preliminary objection raised as to maintainability of the present petition is found not acceptable as a question of law does appear to exist as to the true meaning to be given to section 34(2) of the Act. Also, the proceeding for cancellation of the Gehrukheda license that occasioned the present proceeding has been remitted to the appeal authority by a separate order passed in Writ Tax No. 227 of 2020 on 19.01.2021. As, stated by both sides, the fate of the present petition hangs, at least partly, on the fate of the Gehrukheda license. Then affidavits have already been exchanged - No useful purpose may be served in requiring the petitioner to approach the revising authority at this stage, in such facts. Inherent lack of Jurisdiction - HELD THAT - It appears that the same may not be entirely correct, in the face of the proceedings as they stand today. Though it is true, no prior notice had been issued to the petitioner to cancel his Majhenpurwa license before the order dated 28.05.2019 came to be passed, two different appeals were filed by the petitioner against that order- one against the cancellation of the Gehrukheda license (Excise Appeal no. 31 of 2019) and the other against the cancellation of the Majhenpurwa license (Excise Appeal no. 32 of 2019). While allowing appeal no. 32 of 2019 on 10.08.2019, the appeal authority specifically observed that the licensing authority may issue a fresh notice to the petitioner to cancel the Majhenpurwa license. That order has attained finality. The ground of patent lack of jurisdiction to cancel the Majhenpurwa license may have existed with the petitioner, when that license came to be cancelled first, on 28.05.2019. Upon order dated 10.08.2019 passed in Excise Appeal No. 32 of 2019, the licensing authority issued the notice dated 29.08.2019. On that date the Gehrukheda license of the petitioner stood cancelled. As further discussed later, the jurisdictional fact to proceed against the Majhenpurwa license, under section 34(2) of the Act, thus arose on 28.05.2019 and it existed on 29.08.2019 - The present proceedings arise solely from that notice. Hence, the challenge raised as to lack of jurisdiction does not survive for consideration in this writ petition. At present, the proceedings instituted after issuance of the notice dated 29.08.2019 alone are to be tested, on their merits. That notice was within jurisdiction. Giving full play to the provisions of section 34(1) and (2) of the Act, in case a licensee commits separate violations with respect to each or more than one license held by him, he may stand exposed to proceedings for cancellation of each such license under section 34(1) of the Act, exclusively. If, however, one out of more license held by a licensee is cancelled, either under clause (a) or (b) or (c) of section 34(1) of the Act, it would expose such a licensee to cancellation of his another/other license/s, irrespective of a complete absence of any violation committed in the operation of the another/other license/s. That is the plain meaning of section 34(2) of the Act - Other than excluding the contingencies specified under clauses (d) (e) of section 34(1) from the scope of applicability to the power conferred under section 34(2) of the Act, the legislature has vested a wide discretion on the licensing authority, in that regard. Thus, the legislative intent, is to confine the power under section 34(2) of the Act to situations involving specified violations - as to payment of fee, breach of any express or implied terms and conditions and conviction for any of the specified offences. Unless a license of a licensee is first cancelled for any such ground, another/other license/s of that licensee cannot be cancelled under section 34(2) of the Act. The proceedings under section 34(2) may arise purely in the core interests of revenue, owing to the deliberate violation committed by the licensee, as may have been found/proven in an earlier proceeding of cancellation of any other license issued under the Act. Yet, no further and other violation may exist as a pre-condition to be satisfied or proven before action may be taken under section 34(2) of the Act to cancel any other license of that licensee. Therefore, the proceedings for cancellation of an earlier license must itself bring out existence of reason/s so grave and serious as may give rise to a satisfaction with the licensing authority, that all or any other license of that licensee be also cancelled in the interest of revenue. Illustratively, but not in any way exhaustively, those may be cases of large scale or organized evasion or avoidance of excise duty; breach of terms and conditions made by way of a regular business practice adopted by the licensee; disentitlement earned to hold any excise license, due to any of the specified convictions or operation of law or any other reason/ground that may spring form the facts already proven in the earlier proceeding, to cancel one or more licence of the same licensee, under section 34(1)(a) or (b) or (c) of the Act - oming to the facts of the present case, it would be wholly pre-mature to reach a conclusion that the ground specified in the showcause notice is wholly insufficient or is sufficient for the purposes of examining the correctness or otherwise of the cancellation of the Majhenpurwa licence. It is so because the basic facts giving rise to the cancellation of the Gehrukheda licence, have yet not attained finality. By the order passed in Writ Tax No. 277 of 2020, decided on 19.01.2021, those proceedings have been remanded to the Appeal Authority to examine the same afresh and to record it's conclusions whether the petitioner was in possession of tampered QR Code and Caps. Till the Appeal Authority reaches a firm conclusion as to that, in the facts of the present case, the cancellation of Majhenpurwa licence may not be examined, simultaneously. Thus, for the purpose of clarification, it is stated that in case the petitioner succeeds in establishing that his Gehrukheda licence was not liable to be cancelled as he had not violated either section 34(1) (a) or (b) or (c) of the Act, the present proceedings to cancel the Majhenpurwa license would necessarily fall. However, if the Appeal Authority does reach a conclusion adverse to the petitioner (in that case), it would be for the Licensing Authority to then examine the existence or otherwise of an adequate reason or ground to exercise his extraordinary discretionary power to cancel the Majhenpurwa licence of the petitioner under Section 34(2) of the Act. Once the license of the original licensee was restored, the replacement licensee was found to have no rights surviving with him to claim continuance of his license. Such is not the case here. As observed above, the Gehrukheda license stands cancelled and also, it is not clear if the Majhenpurwa license had ever been renewed for the Excise Year 2018-2019. In any case, that Excise Year is long over - revival of that license is not warranted, at this stage. Petition allowed in part.

Summary

Issues Involved:
1. Quashing of the order dated 05.02.2020 by the Additional Excise Commissioner.
2. Quashing of the order dated 30.10.2019 by the Collector/Licensing Authority cancelling the Majhenpurwa license.
3. Jurisdictional defect due to lack of prior notice before cancelling the Majhenpurwa license.
4. Interpretation and application of Section 34(2) of the United Provinces Excise Act, 1910.
5. The relationship between the cancellation of Gehrukheda license and Majhenpurwa license.
6. The maintainability of the writ petition.

Detailed Analysis:

1. Quashing of the Order Dated 05.02.2020 by the Additional Excise Commissioner:
The petitioner sought to quash the order dated 05.02.2020 passed by the Additional Excise Commissioner, which dismissed the Excise Appeal No. 95 of 2019. This appeal was against the cancellation of the Majhenpurwa license. The court analyzed whether the appeal authority had the jurisdiction to entertain the appeal and whether the proceedings were conducted fairly.

2. Quashing of the Order Dated 30.10.2019 by the Collector/Licensing Authority Cancelling the Majhenpurwa License:
The petitioner also challenged the order dated 30.10.2019, which cancelled the Majhenpurwa license. The court examined the procedural correctness of the cancellation, noting that the initial cancellation on 28.05.2019 lacked prior notice, which was a jurisdictional defect. However, this defect was addressed when a fresh notice was issued on 29.08.2019, leading to the cancellation on 30.10.2019.

3. Jurisdictional Defect Due to Lack of Prior Notice Before Cancelling the Majhenpurwa License:
The court acknowledged that the initial cancellation of the Majhenpurwa license on 28.05.2019 was without prior notice, which was a jurisdictional defect. However, this was remedied when the appeal authority allowed the issuance of a fresh notice, which was done on 29.08.2019. The subsequent proceedings were thus held to be within jurisdiction.

4. Interpretation and Application of Section 34(2) of the United Provinces Excise Act, 1910:
The court delved into the interpretation of Section 34(2) of the Act, which allows for the cancellation of any other license of a licensee if one license is cancelled under certain conditions. The court clarified that while Section 34(1) requires specific violations to cancel a license, Section 34(2) does not require independent violations for the cancellation of another license. The discretionary power under Section 34(2) is to be exercised with caution and based on the proven facts of the initial cancellation.

5. Relationship Between the Cancellation of Gehrukheda License and Majhenpurwa License:
The court noted that the fate of the Majhenpurwa license is partly dependent on the outcome of the proceedings related to the Gehrukheda license. Since the proceedings for the Gehrukheda license were remanded for fresh consideration, the court held that the cancellation of the Majhenpurwa license should also be reconsidered based on the final decision regarding the Gehrukheda license.

6. Maintainability of the Writ Petition:
The court rejected the preliminary objection regarding the maintainability of the writ petition, stating that a question of law exists regarding the interpretation of Section 34(2) of the Act. The court found it appropriate to address the issues raised in the petition rather than directing the petitioner to approach the revising authority.

Conclusion:
The court set aside the orders dated 05.02.2020 and 30.10.2019 and remitted the matter to the licensing authority. The remanded proceedings may be recommenced only after the decision of the Appeal Authority regarding the Gehrukheda license. If no case is made out for the cancellation of the Majhenpurwa license under Section 34(2) of the Act, the petitioner's claim for renewal of the license for the Excise Year 2021-22 may be considered. The court also provided for the possibility of a proportional refund if the petitioner does not seek renewal. The writ petition was partly allowed.