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TMI Blog2019 (9) TMI 1728X X X X Extracts X X X X X X X X Extracts X X X X ..... f. Therefore, what is left by Rule 35-A(22) to the executive is only the determination of the minimum guaranteed quota every year. Rule 35-A(22) occupies the field in respect of issues (i) and (iii). It leaves issue (ii) alone to be determined by the executive, year after year, depending upon the average annual consumption in the State, district-wise. Therefore, what is left unoccupied by the statutory Rules, where the executive can have a play in the joints, is the fixation of minimum guaranteed quota every year. Since the other two issues fall in the occupied field, the respondents cannot issue Annual Policy Announcements, without amending the Rules. Just as a Statute cannot override the Constitution and just as a Rule cannot override a Statute, an executive instruction cannot override a Rule. Fixing a rate of additional fee and a rate of penalty, by ignoring the rate of additional fee stipulated in Rule 35-A(22), would tantamount to executive instructions overriding the statutory Rules. Therefore, condition No. 4.3 of the Excise Policy announced in respect of the years 2013-14, 2014-15, 2015-16 and 2016-17, is ultra vires Rule 35-A(22) and hence, all the writ petitions of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 020 of 2016, 631 of 2016, 609 of 2016, 520 of 2016, 567 of 2016, 524 of 2016, 530 of 2016, 569 of 2016, 576 of 2016, 572 of 2016, 566 of 2016, 571 of 2016, 587 of 2016, 602 of 2016, 537 of 2016, 570 of 2016, 2026 of 2016, 606 of 2016, 630 of 2016, 594 of 2016, 546 of 2016, 561 of 2016, 527 of 2016, 551 of 2016, 548 of 2016, 573 of 2016, 593 of 2016, 556 of 2016, 588 of 2016, 2357 of 2016, 554 of 2016, 608 of 2016, 1324 of 2017, 1539 of 2017, 1154 of 2017, 1326 of 2017, 1188 of 2017, 1542 of 2017, 1538 of 2017, 1563 of 2017, 2454 of 2017, 1543 of 2017, 1148 of 2017, 2457 of 2017, 1150 of 2017, 1149 of 2017, 1544 of 2017, 1546 of 2017, 1187 of 2018, 1550 of 2018, 425 of 2018, 1186 of 2018, 1319 of 2018, 2804 of 2018, 2567 of 2017, 1323 of 2017, 1187 of 2017, 1545 of 2017, 1541 of 2017, 2568 of 2017, 1152 of 2017, 1540 of 2017, 2459 of 2017, 2566 of 2017, 1537 of 2017, 1818 of 2017, 2564 of 2017, 1536 of 2017, 2458 of 2017, 2563 of 2017, 828 of 2019, 8050 of 2014, 8876 of 2014, 8053 of 2014, 7204 of 2014, 7194 of 2014, 8048 of 2014, 8051 of 2014, 8052 of 2014, 8589 of 2014, 8588 of 2014, 8049 of 2014, 8356 of 2014, 8406 of 2014, 8355 of 2014, 8587 of 2014, 3255 of 2015, 2052 of 2015, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Senior Additional Advocate General appearing from the respondents-State. 3. It was agreed across the Bar that CWP No. 5232 of 2014 filed by M/s. Mohan Meakin Ltd. may be taken as the lead case in so far as the manufacturers/distillers/bottlers are concerned and CWPs Nos. 8047 of 2014 and 2302 of 2015 filed respectively by Aradhana Wines and Paradise Wines may be treated as lead cases in so far as wholesalers are concerned and CWP Nos. 2069 and 2745 of 2015 filed respectively by Abhay Prashar and Amit Wine may be treated as the lead cases in so far as retail vends are concerned. What is under challenge 4. What is challenged in the writ petitioners filed by the manufactures/distillers/bottlers is Condition Nos. 10.28(A) and 10.29 of the Excise Policy for 2014-2015, by which an additional fee and a penalty was sought to be levied, if the manufacturers/distillers/bottlers failed (i) to manufacture the quantum of liquor for which they were granted license and (ii) to sell as much quantity of liquor for which they were granted the wholesale license to vend. 5. What is under challenge in the writ petitions filed by the wholesalers, is also the same Condition No. 10.28(A), but with s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to pay additional fee at the rate of Rs. 10/- per proof litre on the unlifted Quota of Country liquor which falls short of 100% of the Minimum Guaranteed Quota. Besides this, the licensee shall also be liable to pay a penalty of Rs. 7/- per proof litre on the unlifted quota of Country Liquor which falls short of the benchmark of 80% of the Minimum Guaranteed Quota. Similarly, the licensee shall also be liable to pay additional fee @ Rs. 56/- per proof litre on the unlifted quota of IMFS which falls short of 100% of the Minimum Guaranteed Quota of IMFS. The licensee shall also be liable to pay a penalty of Rs. 14/- per proof litre on the unlifted quota of IMFS which falls short of the benchmark of 80% of the Minimum Guaranteed Quota. The Asstt. Excise Taxation Commissioner/Excise Taxation Officer I/c of the District shall review the position of lifting of Minimum Guaranteed Quota on Quarterly basis. Lifting position for 1st quarter of the year 2014-15 shall be reviewed latest by 30 July, 2014, for the second quarter, it shall be reviewed latest by 30th October, 2014, for the third quarter latest by 15th January, 2015 and lifting position for the fourth quarter shall be revie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15 have been shown. The Annual Benchmarks of Sale-limits of L-1B and L-1BB licensees have been shown in annexed Annexure-'E' itself at Sr. No. 12 to 27 thereof. The aforesaid Condition of per annum licensee-wise and category-wise Minimum Sale limit in terms of proof liters has been prescribed as per details vide Annexures-E F. Therefore, the afore-mentioned L-1, L-1B and L-1BB wholesale license-holders, whose Annual Sale-limits is less than 40,000 Pls, above 40,000 Pls but less than 80,000 Pls, above 80,000 Pls but less than 1,20,000 Pls and above 1,20,000 Pls during the year 2014-15, their existing Annual Sale-limits are enhanced upto 30%, 20%, 16% and 6% respectively. However, while enhancing the existing minimum Annual Sale-limits of these various licensees upto 30%, 20%, 16% and 6% referred to above as the case may be, the Excise and Taxation Commissioner, Himachal Pradesh reserves the right to rectify the clerical errors of calculations in allocating the Annual sale targets of such wholesale licensees for the year 2014-15 during the financial year as and when it may be necessary to do so. The Annual Benchmarks of sale limits fixed for the year 2014-15 to such afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any quarter in subsequent quarters or latest by 10th March, 2015 thereby attaining the Annual Minimum prescribed sale Limit in terms of prescribed proof litres, such licensee shall be entitled to set off the amount so deposited previously on account of additional fee and the penalty with the prior approval of the Collector (Excise) of the concerned Zone. However, the afore-mentioned order of the Collector (Excise) of the Zone concerned shall be subject to the prior approval of the Excise Taxation Commissioner (H.P.). The Collector (Excise) of the Zone shall further ensure sending of the quarterly reports of the Zone to the Excise Taxation Commissioner, Himachal Pradesh District-wise and licensee-wise at least before the end of the quarter subsequent to the quarter to which the report relates for the first three quarters and for the last quarter on 31st March of the Financial Year itself. 10.29: Provision regarding Annual Sale Limits of the Manufacturers of Country Liquor and Indian Made Foreign Spirit. Each Manufacturer/Bottler of Country liquor and IMFS within the state including L-1B and L-1BB licensees shall be mandatorily required to manufacture/bottle and ensure sale of Min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate higher range of licensees/Bottlers has been enhanced rationally upto the target percentage level the licensees/Bottlers falling on the immediate lower borderline range of the Bottlers/licensees. An additional fee of Rs. 5/- per proof litre and penalty @ Rs. 7/- per proof litre separately in the case of Country liquor manufacturers and an additional fee @ Rs. 28/- per proof litre and penalty @ 14/- per proof litre separately in the case of IMFS manufacturers shall be leviable and imposable on the underproduced/unsold quota of Country liquor or IMFS as the case may be which falls short of the afore-mentioned prescribed Annual quantity/percentage of the Minimum Annual Production Capacity Utilization Limit/sale of each such Distillery with Bottling license/Bottling Plant as indicated against the names of each one of them in Annexures 'D' and 'E' annexed herewith and applicable for the year 2014-15. In case, the defaulting licensee manufacturers and sells his under-produced/unsold quota of any quarter in subsequent quarters or latest by 10th March, 2015 thereby attaining the prescribed under-produced/unsold limit of such Minimum Annual Production Capacity Utilisatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortions which have a monetary impact upon the petitioners alone are challenged. The impact of the offending portion of these conditions is as follows: (i) that a sale of a Minimum 40,000 proof litres of IMFS by the L-1 category of First Range of Licensees is mandatory; (ii) that in case the sale of IMFS falls short by the Minimum Quota, the Licensee is liable to pay an additional fee of Rs. 28/- and penalty of Rs. 14/- per proof litre separately on the shortage; (iii) that a licensee who has not made the minimum sale of IMFS, as per the prescribed sale limit for the year 2014-2015 shall not be eligible for renewal of licence for 2015-16; (iv) that each manufacture/bottler of country liquor and IMFS within the State including L.1-BB licensee should mandatorily manufacture/bottle and ensure sale of Minimum L-1 Production Capacity Benchmark of the Unit/Plant; (v) that in case a licensee is guilty of short manufacturing/short selling, he will be liable to pay an additional fee of Rs. 5/- per proof litre with penalty of Rs. 7/- per proof litre, in addition to the licence fee for the entire quota in respect of country liquor; (vi) that in case of failure on the part of the licensee to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it (B.I.I) Rs. 220/- per proof litre (v) Imported Foreign Spirit (B.I.O.) Rs. 240/- per proof litre. (vi) Imported Beer (B.I.O) Rs. 35 per bulk litre. (vii) Imported Wine Cider (B.I.O) Rs. 30/- per bulk liltre. (viii) Indian Made Wine Cider (Imported through S-1B licenses only) Rs. 28/- per bulk litre. (ix) RTD Beverages (a) Rs. 21/- per bulk litre in the case of alcoholic contents upto 5% (b) Rs. 28/- per bulk litre in the case of alcoholic contents exceeding 5% but not exceeding 8% 15. Similarly the minimum guaranteed quota of country liquor and the foreign spirit and the annual license fee fixed for the year 2014-2015 were as follows: 4.1 The Minimum Guaranteed Quota (MGQ) has been fixed at 2,00,80,700 proof litre of Country Liquor and 1,72,13,500 proof litre of Foreign Spirit Indian Made Foreign Spirit (IMFS) imported Foreign Spirit (IFS) both bottled in India (B.I.I.) and bottled in original (B.I.O.) for the State. No quota has been fixed for Beer, Wine, Cider and RTD Beverages. The district-wise allotment of the MGQ for the year 2014-2015 is as under:- Name of District Minimum Guaranteed Quota Country Liquor (in Pls) Foreign Spirit (in Pls) 1. Shimla 31,49,433 23,68,558 2. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise, has been repeatedly held by courts to be ultra vires and that therefore, there cannot be any such levy. (ii) That the manufacturers as well as the wholesalers are not entitled as per the statutory prescriptions and the license conditions, to sell liquor in the open market, but they are obliged to sell whatever is manufactured and/or held in stock by them only through the retailers and that too upon the production of passes/permits by the retailers and hence the manufacturers and wholesalers cannot be penalized with the levy of additional fee and penalty for not achieving the target when the achievement of target depends upon the performance of somebody else; (iii) That in any case, no penalty can be levied through the Excise Policy issued year after year, especially when there are special provisions for levy of penalty under Chapter-VI of the Himachal Pradesh Excise Act, 2011; and (iv) That the levy of additional fee and penalty upon all the three stake holders, namely the retailers, the wholesalers and the manufacturers, will have in a cascading effect, leading to the collection of three times the revenue. 19. The challenge to the impugned policy conditions is made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State is the exclusive owner of the privilege to trade in liquor and the citizens do not have any fundamental right to carry on the business to manufacture and sell liquor. (iii) That the Himachal Pradesh Excise Act, 2011 prohibits the manufacture, possession and sale of any intoxicant, except under the authority and subject to the terms and conditions of a license granted by the Financial Commissioner; (iv) That Section 27 of the said Act empowers the Government to grant lease to any person, of the right of manufacturing, supplying, selling and of storing for manufacture or sale, liquor, upon payment of such sum in addition to excise duty or countervailing duty and hence the levy under challenge is perfectly authorized by Section 27; (v) That the writ petitioners who had accepted the grant/renewal of licenses year after year with their eyes wide open to the Policy Announcements made year after year, are now estopped from challenging one of the conditions contained in the policy for renewal of the license; (vi) That what is charged by way of additional fee and penalty under the impugned policy conditions are not in the nature of excise duty or any other tax, but only a fee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, their grounds of challenge to the impugned policy conditions have to be tested on different parameters, can be best understood, if we have a look at (i) the different types of licenses contemplated by the Rules, (ii) the different types of fees stipulated by the Rules and (iii) the different types of obligations cast upon them by the Rules. Therefore, let us now take a look at the statutory provisions before we deal with the cases of each of these three categories of persons. A survey of the Statutory provisions: 24. Until the State of Himachal Pradesh became an independent State, the law relating to import, export, transport, manufacture, sale and possession of intoxicating liquor was governed by the Punjab Excise Act, 1914 (Punjab Act 1 of 1914). After the reorganization of the States, the provisions of the same Act were adopted. 25. Section 58(1) of Punjab Act 1 of 1914 confers power upon the State Government to make Rules for carrying out the provisions of the Act. Sub-Section (2) of Section 58 lists out the matters in respect of which provisions may be made in the Rules so issued by the State Government. Some of the matters which may be dealt with by the Rules, are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (d) of Sub-section (2) of Section 80 of the H.P. Act 33 of 2012 is more detailed than Clause (d) of Section 58(2) of the Punjab Act 1 of 1914. What was included in Clause (e) of sub-Section (2) of Section 58 of the Punjab Act 1 of 1914, was included as Clause (i) of sub-Section (2) of Section 80 of the H.P. Act 33 of 1914. Clause (j) of sub-Section (2) of Section 80 of the H.P. Act 33 of 2012 is also in pari materia with Clause (f) of Section 58(2) of the Punjab Act 1 of 1914. 29. Despite sub-Section (2) of Section 80 of the H.P. Act 33 of 2012 containing almost identical or an improvised version of the matters covered in sub-Section (2) of Section 58 of the Punjab Act 1 of 1914, the Government did not think fit to issue a new set of Rules under the H.P. Act, but chose to follow the very same set of Rules issued in 1986 in exercise of the powers conferred under the Punjab Act. As a consequence, it is the H.P. Liquor License Rules, 1986 that continue to hold the field till date and these Rules have validity, in view of Section 82 of the H.P. Act which saves Section 58 of the Punjab Act from repeal. Different types of licenses under the Rules: 30. Though the Rules contemplate arou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Category into which they fall Type of fee payable L.1, L.1-A, L.1-B, L.1-BB, L.1-C L.13 Wholesale vends Fixed fee alone L.2-A, L.9-A, L.10-BB, L.12-AA L.14-C Certain types of retail vends Fixed fee alone L.3, L.3-A, L.4, L.4-A, L.5, L.5-A, L.6, L.7, L.8, L.9 L.12-C Different types of retail vends A combination of fixed fee and assessed fee L.12-A L.12-B Two different types of retail vends Assessed fee only, but together with fixed fee in the case of cinema L.2, L.14, L.14-A L.14-B Retail vend of foreign liquor to public only and wholesale vend to certain types of licenses, retail vend of country spirit for consumption on and off the premises or at a fair or on a special occasion Allotment, renewal, auction or negotiation 35. Rule 15 of the H.P. Liquor License Rules, 1986 contains a prohibition, prohibiting the holding of certain types of licenses in conjunction with certain other types of licenses. Rule 17 lists out certain types of licenses which may be granted only to the holders of certain other types of licenses. 36. The Himachal Pradesh Liquor License Rules 1986 contains four Schedules, namely Schedules-A to D. Schedule-A lists out the different types of licenses indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sgressed by the rule making authority and that a rule making authority has no plenary power. 41. The decision in B.C. Banerjee was also cited with approval by two larger Benches, one in State of Madhya Pradesh vs. Firm Cappulal (AIR 1976 SC 633) and another in Excise Commissioner U.P. vs. Ram Kumar (AIR 1976 SC 2237). B.C. Banerjee was followed even in Lilasons Breweries Pvt. Ltd. vs. State of M.P. (AIR 1992 SC 1393). 42. Relying upon the ratio laid down by the Supreme Court in the aforesaid cases, it is contended by Mr. K.D. Sood, learned Senior Counsel for the petitioners that neither any excise duty nor any compensation in a sum equivalent to excise duty can be levied on the unlifted quantity of liquor, wherever a minimum guaranteed quota is fixed. 43. But in our considered view, there is a small distinction between the cases decided by the Supreme Court and the batch of cases on hand. 44. In B.C. Banerjee, a condition was imposed that the successful bidders will have to sell a prescribed minimum quantity of liquor in their shops and that if they failed to take delivery of the prescribed minimum quantity, they will have to pay excise duty on the quantity of liquor that they fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(1) reads as follows: 28. Fees and other conditions for grant of licenses, permits and passes.-( 1) Every license, permit or pass, under this Act, shall be granted- (a) on payment of such fees, if any, (b) in such form and containing such particulars, (c) subject to such restrictions and on such conditions, and (d) for such period, as the Financial Commissioner may direct. 48. Thus, there are two distinguishing features between the writ petitions on hand and the decision of the Supreme Court in B.C. Banerjee. They are: (i) what was sought to be collected from the licensees in B.C. Banerjee was the actual excise duty even on the quantity of liquor that was not lifted. But in the case on hand what is sought to be collected is only an additional fee. (ii) In B.C. Banerjee, the Supreme Court took note of Section 27 of the M.P. Excise Act, 1915, which is in pari materia with Section 38 of the H.P. Excise Act, 2011. However, there was no provision in the M.P. Excise Act which is similar to Sections 27(1) and 28(1) of the H.P. Excise Act, 2011. In particular, Section 28(1) contains a delegation of power to the Financial Commissioner to grant a license, permit or pass on payment of such f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty on the unlifted quantity of liquor. In para 18 of the report, what was opined by the Supreme Court in Ram Kumar was that the demand made by the State, though disguised as compensation, was in reality a demand for excise duty on the unlifted quantity of liquor which is not authorized by the provisions of the Act . 52. Therefore, right from B.C. Banerjee, the Court was troubled only with the lack of authorization under the provisions of the Act. Hence before applying the line of decisions starting from B.C. Banerjee, we must see if there was authorization or not, under the provisions of the Act. As we have pointed out, there was authorization under Section 27(1) and particularly upon the Financial Commissioner under Section 28(1). Therefore, the line of decisions starting from B.C. Banerjee cannot be used by the petitioners as a magic wand to produce the desired result. 53. The second contention of Mr. K.D. Sood, learned Senior Counsel for the manufacturers/distillers/bottlers is that the manufacturers as well as wholesalers are not entitled as per the statutory prescriptions and the license conditions to sell liquor in the open market. They are supposed to sell whatever is manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the second contention raised by the learned Senior Counsel for the petitioners is well founded. 59. The third contention of the learned Senior Counsel for the petitioners is that no penalty can be levied through Annual Policy Announcements, de hors the provisions of Chapter-VI of the H.P. Excise Act, 2011. 60. It is true that Chapter-VI of the H.P. Act 2011 contains provisions for various types of penalties. Section 39 deals with penalty for unlawful production, manufacture, possession, import, export, transport, sale etc. Section 40 speaks about penalty for rendering or attempting to render denatured spirit fit for human consumption. Section 41 provides for penalty for mixing noxious substance with liquor. Section 42 speaks about compensation for death or injury caused to any person due to consumption of liquor. Section 43 deals with penalty for certain acts by licensee or his servants. Section 44 deals with penalty for fraud by licensed manufacturer or vendor, Section 45 stipulates penalty for consumption of liquor in a chemist's shop, Section 46 prescribes penalty for consumption of liquor in public places and Section 47 speaks about penalty for offences not otherwise prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a similar condition contained in condition No. 4.3 of the Excise Policy for four consecutive years, namely 2013-2014 to 2016-2017. Therefore, the argument of the learned Senior Counsel for the manufacturers in this regard, is available only in respect of one year namely 2014-15 and not the other years. 65. In simple terms, for the year 2014-2015, all the three categories of persons, namely manufacturers, wholesalers and retailers were made liable to pay additional fee and penalty on the quantum of liquor that they failed to lift as per the minimum guaranteed quota. This, according to the learned Senior Counsel for the manufacturers is unreasonable, since the same resulted in claiming the same amount from three different parties. 66. The correctness and validity of the aforesaid contention can be tested only by some mathematical calculation. Therefore, let us take one physical example of one manufacturer, namely Mohan Meakin Ltd. 67. In Annexure-E of the Annual Policy Announcements, for the year 2014-2015, the annual minimum production capacity utilization and sales units for each of the manufacturers was provided in a chart. At Sr. No. 8 of the chart contained in Annexure-E, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s., the wholesaler was required to pay an additional fee of Rs. 28/- per proof Ltrs. and the retailer is required to pay an additional fee of Rs. 56/- per proof Ltrs. This makes the total amount of additional fee levied on the very same quantity to be Rs. 112/- per proof Ltrs. This is in addition to Rs. 14/- per proof Ltrs. to be paid by the manufacturer towards penalty and an equivalent amount to be paid by the wholesaler towards penalty. But insofar as the retailer is concerned, the penalty of Rs. 14/- per proof Ltrs. is payable only if the unlifted quota falls short of 80% of the minimum guaranteed quota. In case it does, the retailer also pays Rs. 14/-, which makes the total amount of penalty collected, as Rs. 42/- per proof Ltrs. (@ Rs. 14/- for each of the three categories of persons, namely, manufacturer, wholesaler and retailer). 72. Therefore, in effect, the respondents will be entitled to collect, for the first quarter of 2014-2015, (i) a total of Rs. 112/- per proof Ltrs. towards additional fee; and (ii) a total of Rs. 42/- per proof Ltrs. towards penalty. In other words, an amount of Rs. 154/- per proof Ltrs. can be collected by the respondents on the unlifted quota. 73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 78. But the annual license fee of Rs. 219/- per proof Ltrs. is payable not on the actual quantity of sale but on the minimum guaranteed quota. The petitioners have no quarrel about this. Therefore, the petitioner Mohan Meakin was obliged to pay (and they are not disputing this), a license fee of Rs. 219/- per proof Ltrs. of IMFS, on the entire quarterly quota, namely 2,44,838.184 proof Ltrs. Therefore, by way of annual license fee, Mohan Meakin Ltd. would have paid around Rs. 5.35 crores. (2,44,838.184 per proof Ltrs. X Rs. 219/-). 79. Hence the actual short fall was only around rupees two crores. (Rs. 7.30 crores - Rs. 5.35 crores). Let us now see whether the State was attempting to collect an amount more than this amount of rupees two crores, by imposing the same levy of additional fee and a penalty upon the three different categories of persons. 80. As we have indicated earlier, the manufacturer is obliged to pay Rs. 28/- per proof Ltrs. towards the additional fee and a penalty of Rs. 14/- per proof Ltrs. towards the penalty. The wholesaler is required to pay a similar amount towards the additional fee and penalty. In the example that we have taken on hand of Mohan Meakin Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty is unauthorized. 87. But the aforesaid contention may not be wholly correct. As we have pointed out earlier, the Himachal Pradesh Excise Act, 2011, contains three provisions, two in Chapter-IV and one in Chapter-V, which authorize the levy of (i) such sum, (ii) fees, and (iii) sum. These are Sections 27, 28 and 38, the first two of which fall in Chapter-IV and the third falls in Chapter-V. The Act also contains a separate provision in Section 36 included in Chapter-V for the levy of excise duty or countervailing duty. Sections 27, 28 and 38 of the Act have already been extracted by us in paragraphs 46 and 47 above. While Section 27 speaks about payment of such sum for the grant of a lease of the right of manufacturing or supplying by wholesale or of selling by wholesale or retail or of storing or of storing for manufacture or sale, Section 28 speaks of payment of fees for the grant of license, permit or pass. Again Section 38 speaks of acceptance of a sum in consideration of the lease of any right under Section 27. 88. When the Financial Commissioner is expressly authorized by section 28, to issue directions for the grant of license upon payment of fees, there is no use conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other types of fees, indicated in Rule 35. Rule 35(5) speaks about the rates of application fee, renewal fee, basic license fee and the rates of license fee applicable on different kinds of liquor. Therefore, Schedule-C also contains rates of renewal fee, basic license fee and license fee. These types of fees are also defined in the Explanation under sub-Rule (6) of Rule 35. 94. Rule 35-A, one of the sub-Rules of which is relied upon by the wholesalers, deals broadly with the allotment of licenses. Though there is nothing inherent in Rule 35-A to indicate that the conditions stipulated therein apply only to the retailers, the Government has understood Rule 35 as applicable only to retailers. We shall deal with aspect separately in the next part of this order. Sub-Rule (22) of Rule 35-A reads as follows: 35-A. Allotment of licenses. xxx xxx xxx (22) The licensee shall be required to lift the Minimum Guaranteed Quota as fixed for each vend failing which he shall still be liable to pay the license fee fixed on the basis of the minimum quota. In addition to the payment of license fee on the un-lifted Minimum Guaranteed Quota the licensee shall also be liable to pay additional fee at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f retailers: 98. The first contention of the retailers is that the additional fee levied for short-selling, partakes the character of excise duty, as it is intended to compensate the State for the loss of revenue in the form of excise duty. But this is the very same contention that was raised on behalf of the manufacturers, on the basis of a long line of decisions starting from B.C. Banerjee. However, we have rejected this contention, on the basis of statutory prescriptions. 99. Moreover, the retailers cannot be heard to raise such a contention, for two reasons. As we have stated elsewhere, the levy of additional fee for the retailers, commenced (i) from the year 2009 when Rule 35-A(22) was inserted and (ii) from the year 2013-14 when condition No. 4.3 was incorporated in Annual Policy Announcements which continued up to the year 2016-17. The retailers came up with a writ petition for the first time only in the year 2015, challenging not only the policy conditions imposed in the Excise Policy for 2013-14 but also the policy condition imposed in the Excise Policy for 2014-15. By the time the retailers chose to challenge the condition contained in the Excise Policy 2013-14, the next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed for the breach of license conditions. Therefore, it is contended that to levy an additional fee and a penalty would tantamount to imposition of double penalties. 104. But we do not agree. What is contemplated by condition No. 4.3, in substance is as follows: (i) That insofar as country liquor is concerned, the licensee should pay an additional fee at the rate of ` 10/- per proof litre on the unlifted quota of country liquor which falls short of 100% of the minimum guaranteed quota. (ii) That in respect of country liquor, the licensee, in addition to the additional fee, should also pay a penalty of ` 7/- per proof litre if the unlifted quota falls short of the benchmark of 80% of the minimum guaranteed quota. (iii) That in respect of IMFS, the licensee should pay an additional fee at the rate of ` 56/- per proof litre on the unlifted quota of country liquor which falls short of 100% of the minimum guaranteed quota. (iv) That in respect of IMFS, the licensee, in addition to the additional fee, should also pay a penalty of ` 14/- per proof litre if the unlifted quota falls short of the benchmark of 80% of the minimum guaranteed quota. 105. Therefore, the additional fee and penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the last quarter is concerned. While the extracted portion of condition No. 4.3 provides for a set off, if the failure to lift the minimum guaranteed quota in any one or more of the first three quarters is compensated in the subsequent quarter, there is no such provision insofar as the last quarter is concerned. 110. Therefore, the extracted portion of condition No. 4.3 suffers from two incongruities. They are: (i) Though the minimum guaranteed quota is ordained to be lifted during the period of twelve calendar months, the performance is assessed once in a quarter of three months. But so far as the last quarter is concerned, the above extracted portion makes it obligatory for the retailer to achieve the entire target by the 10th March of the year. In other words, though the target for lifting the minimum guaranteed quota can be achieved in a period of twelve calendar months, what is achieved in a period of eleven months and ten days alone is taken into account. (ii) While set off is permitted for the shortfall in the quota lifted during the first three quarters, if such shortfall is compensated before the 10th day of March, there is no such provision for a set off for the shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exercisable even in the absence of the Rules and that the non-framing of Rules does not curtail the power of the State Government to issue a notification. 114. Since Section 28(1) empowers the Financial Commissioner to issue directions with regard to payment of fees for the grant of licenses, permits and passes, it is contended by the learned Senior Additional Advocate General that the ratio of the decision in Surinder Singh will squarely apply. 115. But we do not think so. The ratio of the decisions in Surinder Singh and Orissa State (Prevention Control of Pollution) Board will not be applicable to the cases on hand. This is for the reason that in the cases on hand, a statutory rule is in existence. 116. If the statutory Rules had been completely silent, with regard to the fixation of minimum guaranteed quota and with regard to the consequences for the failure to achieve the quota, we could have accepted the aforesaid contention. Once the statutory Rules had occupied the field in the form of Rule 35-A(22), there was nothing left for the executive to exercise. In fact the ratio in Surinder Singh is also to this effect, as can be seen from the last two lines of the portion from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood, learned Senior Counsel for the manufacturers, the argument to take it or leave it, advanced by the State of Kerala under the Kerala Abkari Shops Disposal Rules, 2002 was rejected by the Supreme Court in Kerala Samsthana Chethu Thozhilali Union vs. State of Kerala [(2006) 4 SCC 327]. Paragraph 58 of the report in the said decision may be usefully extracted as follows: 58. Take it or leave it argument advanced by Mr. Chacko is stated to be rejected. The State while parting with its exclusive privilege cannot take recourse to the said doctrine having regard to the equity clause enshrined under Art. 14 of the Constitution of India. The State must in its dealings must act fairly and reasonably. The bargaining power of the State does not entitle it to impose any condition it desires. 121. In Mohan Meakin Ltd. vs. State of Himachal Pradesh [(2009) 3 SCC 157], the Supreme Court followed the decision in Kerala Samsthana Chethu Thozhilali Union. 122. The argument take or leave it cannot be advanced on behalf of the State at least insofar as the manufacturers are concerned. Once an industry is set up at a huge cost, providing for employment opportunities and the development of ancillary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the State in the form of a license, can always be tested with reference to the Statute and the Rules framed there-under. None of the aforesaid decisions prohibit the testing of the same. 127. Relying upon the observations of the Constitution Bench in paragraphs 15 and 16 of its decision, it is contended by the learned Senior Additional Advocate General that the petitioners who offered their bids in the auctions, did so with full knowledge of the terms and conditions attached to the auctions and hence they cannot be permitted to wriggle out of the contractual obligations. He also contended that the licensees offered their bids voluntarily in the auctions with full knowledge of the commitments which the bids involved. Therefore, he contended that it was not open to them to come to Court. 128. But as we have pointed out earlier, the petitioners in these cases are persons who already held licensees which came up for renewal year after year. The terms and conditions for the renewal, are indicated in the Annual Excise Policy Announcements. As rightly contended by the learned Senior Counsel for the petitioners, the applications for renewal of licenses are required to be made, as per R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into a contractual relationship with the State cannot turn around and question the terms and conditions of the contract. 133. But as we have pointed out earlier, the power to enter into a contract, which is recognized by Article 298 of the Constitution is regulated by the Himachal Pradesh Liquor License Rules. Therefore, the terms and conditions of the license, can always be tested within the four corners of the Statutory Rules for finding out whether they run contrary to the Rules or not. 134. The next contention of Mr. Ajay Vaidya, learned Senior Additional Advocate General, is that the petitioners have not chosen to challenge the fixation of minimum guaranteed quota under the policy conditions but have merely challenged the levy of additional fee and penalty for the failure to lift the minimum guaranteed quota. Therefore, it is his contention that a person who does not question the imposition of an obligation cannot challenge the imposition of certain consequences flowing out of non-compliance with the obligations. 135. The above contention is fairly justified. Persons who did not question the fixation of minimum guaranteed quota, cannot come and contend that even if they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention. As a matter of fact, the Financial Commissioner has power by virtue of Section 28 of the H.P. Excise Act, 2011 to issue directions even with regard to payment of fees for the grant of licenses, permits and passes. Similarly, condition No. 1.1 of the Policy Announcements confers power upon the Excise and Taxation Commissioner to impose obligations that may not be traceable to the Act and the Rules. Thus, there are sufficient safeguards for both the Financial Commissioner and the Excise and Taxation Commissioner. 141. But it does not mean that either the Financial Commissioner or the Excise and Taxation Commissioner can impose an obligation, which runs contrary to an obligation imposed by the Act or the Rules. It is always permissible for us to test whether an additional obligation imposed by the Excise and Taxation Commissioner as per condition No. 1.1 of the Policy Announcements, runs contrary to any Rule. It is well within our jurisdiction to test whether the field sought to be covered by the Excise and Taxation Commissioner is already occupied by the provisions of the Act or the Rules. In the case on hand, Rule 35-A(22) appears to hold the field. Therefore, we c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has it undergo any change till date? The Rule was introduced on 06.04.2009 vide Notification No. 7-155/2008-EXN-9076-95 dated 31.03.2009 published on 06.04.2009. There has been no amendment notification issued by the Financial Commissioner (Excise) therefore, no change has been carried out in the Rule 35-A(22) till date. 2 Does this rule applied to Whole Sellers/Retails/Manufacturers/or does it apply to Retailer only? Rule 35-A of the H.P. Liquor Rule, 1986 is the main Rule and has been specifically made Subject to Rule 34 of these Rules . Accordingly, rule 35- A(22) is applicable to retail sale licensees 3 Does it apply to all or only one? Hence, it does not apply to all i.e. (a) Manufactures, (b) Whole Sellers and (c) Retailers, but it only applies to Retailers. 4 What was the necessity for imposing the condition 4.3 in the annual Excise Policy? The condition No. 4.3, 10.28(8) and 10.29 of the Excise announcement was approved by the State Govt. The gist of reasons for introduction of para 4.3 and 10.29 which is as under: (i) Non-lifting of remaining 20% quota resulting in Revenue loss. (para 4.3) (ii) The percentage level of capacity utilization of certain Plants was below 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed in Rule 35-A(22), for all these years in question, including the years from which and during which, the Rule had been in force. 150. Insofar as the wholesalers and manufacturers are concerned, the Rules are silent about any obligation to lift the minimum guaranteed quota. Therefore, it is open to the respondents to fill up this void, in the form of Annual Policy Announcements, as held by the Supreme Court in Surinder Singh, which was followed in Orient Paper Mills. 151. But since what is sought to be collected by way of additional fee and penalty, is as per the terms of the contract, they can be tested in terms of the provisions of the Contract Act. When so done, it is found that the wholesalers and manufacturers are imposed with a financial burden, not for their own failure to fulfill the contractual obligations, but for the failure of third parties namely retailers to fulfill their obligations. We have elaborated this position elsewhere while dealing with the second contention of the manufacturers. In addition, the additional fee and penalty sought to be collected from all the three categories of persons, exceeds the loss of revenue that the State would suffer in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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