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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 ..... 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-Bottled in Original). The respondents in CWP No.6883 of 2017 including the private respondents are the same. The petitioners are, as their name suggests, an association of hotels and restaurants who purchase liquor for the wholesalers. 4. On 06.03.2017, the excise policy for the State of Haryana was announced for the period 01.04.2017 to 31.03.2018. The learned counsel appearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 granted subject to the provisions of the Punjab Excise Act, 1914 and the Rules/Regulations/Instructions/Policies framed there under from time to time as applicable to the State of Haryana." "9. FIXED FEE LICENSES: .... ..... ....... ......... ........... ....... ......... ......... ....... ...... ..... ....... 9.5 L-1BF LICENSE FOR IFL: 9.5.1.1 A wholesale license in the form of L-1BF for Impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior 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 between 9.00 A.M. on 19.03.2017 (Sunday) and 4.00 P.M. on 20.03.2017 (Monday). The evaluation of the tenders was to be on 20.03.2017 at 6.00 P.M. The bidders were required to deposit an amount of Rs. 2.5 crores as EMD for placing the online bids. The petitioners relied upon these facts to contend that there was insuffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. The petitioners' commercial interests may well be affected for a sole wholesaler can dictate the commercial terms and can even decide whether or not to do any business with them. Similarly, the petitioner in CWP No.6883 of 2017 is an association of hotel and restaurant owners in the State of Haryana. Their commercial interests would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner 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:- .... ..... ....... ......... ........... ....... ......... ......... ....... ...... ..... (e) regulating the period and localities for which, and, the persons or classes of persons, to whom licenses, permits and passes for the vend by wholesale or by retail of any intoxicant may be granted and regulating the number of such licenses which may be granted in any local area; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 delegate to the Financial Commissioner the powers conferred inter alia by section 58. In the result, therefore, the Financial Commissioner has no power to stipulate the number of licences that can be issued. 18. If, indeed, the power to fix the number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nistered 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 Maharashtra), which was the border area, taxable event was not the entry in Nagpur District but entry in area of Amravati Municipal Corporation. The levy, therefore, is not, as urged by the learned counsel for appellant, on entry of vehicle in any part of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 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 notification to make rules regulating the sale of any intoxicants. The sale is regulated by insistence upon the dealers possessing licences or permits. Thus, the issuance of licences falls within the words "regulating the ............... sale of any intoxicant". The power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 State of Haryana is contrary to the excise policy, the preface of which we quoted earlier. 27. It is true that the preface to the excise policy of the Haryana State for the year 2017-18 states that one of the aims of the excise policy of the State of Haryana is broa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pick and choose the parties that he wishes to deal with and, in effect, refuse to deal with those he does not wish to deal with including by devising various strategies. In doing so, the sole wholesaler can also effectively promote and encourage a particular brand or brands in preference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 case of liquor licences as well. The State is entitled to deal in liquor to the exclusion of all others. We will presume that when it parts with its privilege it is bound to consider the claims of all the parties who are eligible to acquire this privilege. Once the State parts with this privile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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 ground that they create a monopoly. Properly speaking, there can be a monopoly only when a trade which could be carried on by all persons is entrusted by law to one or more persons to the exclusion of the general public. Such, however, is not the case with the business of liquor. R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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