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TMI Blog2017 (5) TMI 1657X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the petitioners that the amended rule and the stipulation in the policy that there would be only one wholesale licence in the entire State of Haryana adversely affects the rights of the petitioners and those similarly situated. The prejudice, according to them, is that that the sole wholesaler can pick and choose and dictate commercial terms at will. If there were more licensees the competition would safeguard the sellers and buyers interests as well. The State, we will presume, even in the trade and business of liquor must act fairly and impartially and not arbitrarily. We will presume that in granting liquor licences and permits the State cannot adopt a pick and choose policy and must throw the field open to all those who are otherwise eligible. In the present excise policy, the State has permitted every eligible party to bid. It has not discriminated against or in favour of any party. The essential criteria for the appointment of the wholesaler is the value of the bid - The challenge to the policy and to the rule on the ground that the appointment of a sole wholesaler in respect of an L-1BF Licence would adversely affect the commercial interests of those who he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT S.J. Vazifdar, These petitions are disposed of by this common order and judgment as the issues that arise therein are similar. 2. The petitioners have essentially challenged the provision in the excise policy for the year 2017-18 and a rule which stipulate that only one L-1BF licence would be granted. The L-1BF licence entitles the licensee to deal as a wholesaler in foreign liquor (BIO Bottled in Original). According to the petitioners, the wholesale business ought not to be entrusted only to one licensee for reasons we will deal with. 3. In CWP No.6870 of 2017, the petitioner-International Spirits and Wines Association of India is a company registered under section 25 of the Companies Act, 1956, and claims to be a representative body of international spirits and wines companies having business establishments in India. It claims to serve as a platform to represent the interests of its members before various fora. Respondent No.2 is the Excise Taxation Commissioner, Haryana, Respondent No.3 is Ashir Marketing (India) Private Limited, who, being the highest bidder, has been granted the L-1BF Licence to deal as a sole wholesaler in foreign liquor (BIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a high priority on the agenda by the policy planners. However, when it comes to framing an Excise policy, social considerations and ramifications also assume paramount importance. The Excise Policy for the year 2017-18 aims at weeding out the deviations, providing greater stability in the trade, catering to the emerging requirement in a fast changing scenario and clientele and enhancing government revenue. Increase in the VAT rate on liquor and rationalization of excise duty structure and to encourage consumption of low alcoholic content liquor as compared to hard liquor and providing incentives to the local manufactures and consideration of the concerns of all the key stakeholders are some of the notable features of the new Excise Policy. The detailed features of the Excise Policy for the year 2017-18 are as under:- (B) The relevant clauses that follow this preface read as under:- 2.13 GRANT OF LICENSES: 2.13.1 The licenses shall be granted by the Deputy Excise and Taxation Commissioner (Excise) of the district on behalf of the Collector after the approval of the ETC (FC), Haryana. 2.13.2 All licenses, whether for wholesale or for retail sale, shall be grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were introduced and were to come into force with effect from 01.04.2017. Accordingly, the petitioners amended the petition by challenging rule 24(i-eeee) of the 1970 Rules which was introduced by the amendment Rules. The rule provided for the appointment of only one L-1BF licensee. 6. Mr. Mohan Jain, the learned senior counsel appearing on behalf of the petitioner in CWP No.6883 of 2017, supported Mr. Virmani s challenge to rule 24 (i-eeee) and the clause in the excise policy stipulating that only one L-1BF Licence will be issued in the entire State of Haryana. Mr. Virmani raised two other contentions which we will deal with first. 7. Firstly, Mr. Virmani submitted that there was insufficient time for the bidders to submit a valid bid. According to the petitioners, the excise policy and the notice inviting tenders were uploaded only on 17.03.2017. The respondents contend that the same were uploaded on 08.03.2017. A public notice was also issued on 17.03.2017 inviting e-bids for the allotment of a sole L-1BF licence to import foreign liquor (BIO) in the State of Haryana for the year 2017-18. 17.03.2017 was a Friday. The notice stipulated that the etenders were to be submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that would not affect the petitioners right nor redress their grievance. On the other hand, there is equally a possibility that a lower amount might be realised in the fresh tender process and the petitioners were unwilling to secure the State against a possible loss of revenue on that account. We are not inclined, therefore, to exercise our extra-ordinary jurisdiction under Article 226 on this ground. 10. Before dealing with the petitioners main contention, we must deal with the preliminary objection raised on behalf of the respondents that the petitioners do not have locus standi. 11. It is true that in CWP No.6870 of 2017, the only averment is that the petitioner is a representative body of the International Spirits Wines Companies having business establishments in India and the petitioner serves as a platform to represent the interests of its members before various fora. Mr. Virmani, however, submitted that the petitioner also imports the product, namely, foreign liquor Bottled in Original (BIO) from its sister/holding companies incorporated outside India and that it can and does intend selling the same to the wholesalers in India including in the State of Haryana. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll other excise officers in his division. (c) Subject as aforesaid and to the control of the Commissioner and unless the State Government shall by notification otherwise direct the Collector shall control all other excise officers in his district. 13. Delegation:- (a) The State Government may by notification delegate to the Financial Commissioner or Commissioners all or any of its powers under this Act, except the powers conferred by Section 14,21, 22, 31, 56 and 58 of this Act. (b) The State Government may by notification permit the delegation by the Financial Commissioner, Commissioner or Collector to any person or class of persons specified in such notification of any powers conferred by this Act or exercised in respect of excise revenue under any Act for the time being in force. 58 . Power of State Government to make Rules.- (1) The State Government may by notification make rules for the purposes of carrying out the provisions of this Act or any other law for the time being in force relating to excise revenue. (2) In particular and without prejudice to the generality of the foregoing provisions , the State Government may make rules:- . .. . . .. .. .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following clause shall be substituted, namely :- (i-eeee) For a license in form L-1BF (a) Reserve prise shall be ` 50,00,00,000/- (b) The license in form L-1BF shall be allotted through e-bidding to the highest bidder (c) There shall be only one L-1BF license in the State (d) In case no eligible bid equal to or above the reserve price is received for the lone L-1BF license, the same shall be allotted exclusively to a Government owned entity on the terms and conditions as decided by the Government. The permit and brand label fee shall be levied as under to procure Stock of liquor by the L-1BF licensee. 17. Considerable reliance was placed on section 58(2)(e) of the 1970 Rules to contend as follows: Under section 58(2)(e) the State Government may make rules inter alia regulating the number of such licences which may be granted in any local area. Section 59 provides that the Financial Commissioner may by notification make rules for a variety of purposes. The number of licences is, however, not mentioned in section 59. Accordingly, only the State Government has the power to make rules. Further, under section 13(a), the State Government is not entitled to delega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entry of sugarcane into the premises of a factory. What is, therefore, required to be examined is, how the word local area should be understood? In Diamond Sugar Mills [AIR 1961 SC 652] the question whether entire area of the State was an area administered by State Government and was covered in the phrase local area , was not decided. The expression local area has been used in various articles of the Constitution, namely, 3(b), 12, 245(1), 246, 277, 321, 323-A, and 371-D. They indicate that the constitutional intention was to understand the local area in the sense of any area which is administered by a local body, may be corporation, municipal board, district board etc. The High Court on this aspect held, and in our opinion rightly that the definition does not comprehend entire State as local area as the use of word a before local area in the section is significant. The taxable event according to High Court, is not the entry of vehicle in any area of the State but in a local area. The High Court explained it by giving an illustration that if a motor vehicle was brought from Jabalpur (Madhya Pradesh) for being used or sold at Amravati (in Nagpur District of Maharashtr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t defined in the Act or in the Rules either. It normally refers to a reasonably small compact area. It would be an area within a local area and, therefore, smaller than a local area. The word has been used in other enactments to mean a compact area smaller than a city, town or village. (see K J Aiyar's Judicial Dictionary, 16th Edition, page-1046) In any event, the term localities in section 58(2)(e) is not relevant to the State Government s power to make rules regulating the number of licences. It is relevant to the State Government s power to make rules to regulate the period and localities for which the persons or classes of persons to whom licences, permits and passes for the vend by wholesale or by retail of any intoxicants may be granted. What follows this are the words and regulating the number of such licenses which may be granted in any local area . Thus, the number of licences is in relation to a local area and not a locality. 22. In our view section 59(a) confers powers upon the Financial Commissioner to make rules specifying the number of licences that may be issued for the whole of the State. It confers power upon the Financial Commissioner by a notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State is not contained in section 58 our upholding this submission would not carry the petitioners case further. 24. Mr. Sinhal s submission that it would be absurd to suggest that the Financial Commissioner can prescribe the type of licence but not the number of licences is of no assistance in determining the issue. It is for the Legislature to decide whether the State Government or the Financial Commissioner has the power to prescribe the type of licences or the number of licences. It may confer either of the powers upon either or both of them. It has, in fact, in section 58(2)(e) conferred the power upon the State Government to regulate the number of licences in respect of a local area only. 25. In the circumstances, it must be held that the Financial Commissioner had the power to make rules regulating the number of wholesale licences in the State of Haryana as a composite whole. It did so by making rule 24(i-eeee), which prescribes that there would be only one wholesale licence for the State of Haryana. 26. It was then submitted on behalf of the petitioners that rule 24(i-eeee) and clause 9.5.1.2 which stipulate that there would be only one wholesale licence for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores, whereas, under the present policy, the revenue already generated is over ₹ 62 crores. 30. This brings us to the petitioners apprehension. It was submitted on behalf of the petitioners that the amended rule and the stipulation in the policy that there would be only one wholesale licence in the entire State of Haryana adversely affects the rights of the petitioners and those similarly situated. The prejudice, according to them, is that that the sole wholesaler can pick and choose and dictate commercial terms at will. If there were more licensees the competition would safeguard the sellers and buyers interests as well. 31. Mr. Sinhal, on the other hand, submitted that there are adequate safeguards. He contended that for instance clause 9.5.2.3 and sub-clauses (v) and (vi) thereof in particular control the pricing as well as supply of any brand in demand. 32. There may be some safeguards within the policy which protect the rights of the upstream licensees such as manufacturers as well as the downstream licensees i.e. the purchasers, such as, retailers and holders of licences for bars, clubs and restaurants. There is no doubt, however, that a sole wholesaler can pi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of buildings. It can do so itself to the exclusion of all others. It is also entitled to engage private parties to do so. The State cannot pick and choose who to deal with. Absent any special circumstances, the State would be bound to consider the claim of every party that is otherwise eligible to undertake the work. However, once the State parts with its right to construct a building and hands it over to a private enterprise, the matter ends there so far as it concerns the work that it has contracted to the private party. The contractor is not bound to call for tenders in respect of every item involved in the construction. The contractor is not bound to consider the application of every party for the supply of material required for the construction of the buildings. The contractor is entitled to obtain the material from such parties as it desires and on such terms and conditions that the contractor desires. The suppliers of the material would not be entitled to compel the contractor to afford them an opportunity of supplying the material. The rules of the game that apply to a State or an instrumentality of the State do not apply to such contractors. 35. This would apply in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said that there is exclusion of competition and thereby monopoly is created. 37. In Cooverjee B. Bharucha vs. Excise Commissioner and the Chief Commissioner, Ajmer, 1954 AIR (SC) 220=1954 SCR 873, the petitioner inter alia contended that the excise regulations and the auction rules were ultra vires as the same purported to grant a monopoly of trade to a few persons and were thus inconsistent with Article 19(1)(g) of the Constitution of India. The Supreme Court held:- 8. The contention that the effect of some of these provisions is to enable Government to confer monopoly rights on one or more persons to the exclusion of others and that creation of such monopoly rights could not be sustained under Article 19 (6) is again without force. Reliance was placed on the decision in Rashid Ahmad v. Municipal Board of Kairana, AIR 1950 Supreme Court 163. That decision is no authority for the Proposition contended for. Elimination and exclusion from business is inherent in the nature of liquor business and it will hardly be proper to apply to such a business principles applicable to trades which all could carry. The provisions of the regulation cannot be attacked merely on the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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