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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 18TH DAY OF AUGUST, 2017
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
W.P.No.27575/2017, W.P.No.28172/2017 C/W
W.P.No.27988/2017, W.P.No.29609/2017, W.P.No.31513/2017, W.P.No.31515/2017, W.P.No.31517/2017, W.P.No.31518/2017,
W.P.No.25895/2017 AND W.P.No.26805/2017 (EXCISE)
W.P.No.27575/2017:
Between: M/s. High Point Hotels Pvt. Ltd., No.42, 4th Cross, Industrial Layout 5th Block, Koramangala Bengaluru-560 001. By Managing Director Kanchan Lulla W/o Late Harish Lulla Aged about 61 years. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block BMTC Building, Shantinagar Bengaluru-560 027.
R
Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters
M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
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2. The Deputy Commissioner Bangalore Urban District Bengaluru-560001.
3. The Deputy Commissioner of Excise
Bengaluru Urban District Bengaluru-560027.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned demand as per Annexure-G dated 28-05-2015 issued by the respondent No.2 in EXE AGA AUDIT 41/2012-13 & etc.
W.P.No.28172/2017:
Between: M/s. Omkar Enterprises CL-9 Licensee A Partnership firm near Tin Factory No.33-34, Keerthi Building Old Madras Road, Dooravaninagar Bengaluru By is partner K. Prakash Shetty S/o Prabhakar Shetty. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block BMTC Building, Shantinagar
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The Excise Commissioner in Karnataka and others
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Bengaluru-560 001. 2. The Deputy Commissioner
Bangalore Urban District (East) Bengaluru-560001.
3. The Deputy Commissioner of Excise
Bengaluru Urban District (East) Bengaluru-560001.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned notice as per Annexure-F dated 28-05-2015 in No.EXE AGA AUDIT 41/2012-13 & etc.
W.P.No.27988/2017:
Between: Y.R. Manohar S/o R.K. Kanchan Aged about 64 years CL-9 Licensee M/s. Brigade Garden No.48/12, 2nd Floor Brigade Road Bangalore-560 001. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block
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BMTC Building, Shantinagar Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District Bengaluru-560 009.
3. The Deputy Commissioner
Bangalore Urban District Bengaluru-560009.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise year 2017-18 which is now in force as per Annexure-A bearing No.EXE BEM (VA)(PU)(45)/10/CL-9-2016-17 & etc. W.P.No.29609/2017:
Between: Speciality Restaurants Pvt. Ltd, CL-9 Licensee No.136, 1st Cross Road, 5th Block Jyoti Nivas College Road Koramangala. Represented by Santanu Karmakar. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block
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BMTC Building, Shantinagar Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District Bengaluru-560009.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise Year 2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31513/2017:
Between: Main Land China CL-9 Licensee Aged about 42 years No.14, Church Street Bangalore By its Manager Santanu Karmakar. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block
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BMTC Building, Shantinagar Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District Bengaluru-560009.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise Year 2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31515/2017:
Between: C.K. Dasappa S/o. Late Kariyappa Gowda Aged about 63 years CL-9 Licensee 28/2, 1st Floor, Primus Siddapur, White field Main Road, Bengaluru. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block
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BMTC Building, Shantinagar Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District (East) Bengaluru-560009.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise Year 2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31517/2017:
Between: Specialty Restaurants Pvt. Ltd. Cl-9 Licensee Aged about 42 years No.24, Upper Ground Orion Mall Rajkumar Road Malleshwaram West, Bangalore By its Manager & Authorised Representative Santanu Karmakar. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block
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M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
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BMTC Building, Shantinagar Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District Bengaluru-560009.
4. Inspector of Excise
Subramanyanagara Range Bengaluru-560021.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise Year 2017-18 which is now in force as per Annexure-A & etc.
W.P.No.31518/2017:
Between: Specialty Restaurants Pvt. Ltd. Cl-9 Licensee Aged about 42 years No.4032, Golden Lights II Stage, 5th Block, HAL 100ft. Road, Jyoti Nivas College Road Bengaluru By its Manager Santanu Karmakr. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate)
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And: 1. The Excise Commissioner in Karnataka
2nd Floor, TTMC, ‘A’ Block BMTC Building, Shantinagar Bengaluru-560 027.
2. The Deputy Commissioner
Bangalore Urban District Bengaluru-560 009.
3. The Deputy Commissioner of Excise
Bangalore Urban District (East) Bengaluru-560009.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
***** This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise Year 2017-18 which is now in force as per Annexure-A & etc.
W.P.No.25895/2017:
Between: Sea Route Bar & Restaurant No.725, 1st Floor, M.K. Towers Modi Hospital Road Rajajinagar 1st Stage Bangalore-560 001 Represented by its Proprietor Mr. P. Krishna. Old Address: Searock Bar & Restaurant No.20/3, 27/4
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M/s. High Point Hotels Pvt. Ltd., and others Vs.
The Excise Commissioner in Karnataka and others
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Kumara Park East Haikrishna Road Shivanand Circle Bangalore-560 001. … Petitioner (By Mr. Ismail Muneeb Musba, Advocate) And: 1. The State of Karnataka
By its Principal Secretary Finance Department Vidhana Soudha Bangalore-560 001.
2. The Deputy Commissioner Excise
Vokkaligara Bhavana Ranichennamma Circle Bengaluru-560 001.
3. The Deputy Commissioner
Bangalore City Bengaluru-560001.
4. Inspector of Excise
North Range Bangalore-560 022.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
*****
This Writ Petition is filed under Articles 226 & 227 of
the Constitution of India, praying to issue a writ of certiorari
or any other appropriate writ, direction or order quashing
demand notice bearing No.E.Ex.E/AG Audit/41/2012-13
dated 28-05-2015 produced hereto as Annexure-B issued by
the Respondent No.3, D.C. Bangalore City & etc.
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W.P.No.26805/2017:
Between: Sri. T.N. Krishnamurthy S/o Narasimhaiah @ Narase Gowda Aged about 62 years Prop: M/s. Lacasa Bar & Restaurant Katha No.877/1, 878/2, 895/19 & 896/20 1st and 2nd Floor, Blooming Dale Kasavanahalli Carmala Ram Post Bangalore-5600035. … Petitioner (By Mr. K.N. Putte Gowda, Advocate) And: 1. The State of Karnataka
Rep. by its Principal Secretary to Government Department of Finance Vidhana Soudha Dr. B.R. Ambedkar Veedhi Bangalore-560 001.
2. The Commissioner of Excise
Government of Karnataka 2nd Floor, TTMC ‘A’ Block BMTC Building, Shanthinagar Bengaluru-560 027.
3. The Deputy Commissioner
Bangalore Urban District Bengaluru-560009.
4. The Deputy Commissioner of Excise
Bangalore Urban District Bangalore-560001.
… Respondents (By Mr. A.M. Suresh Reddy, AGA)
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The Excise Commissioner in Karnataka and others
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*****
This Writ Petition is filed under Articles 226 & 227 of the Constitution of India, praying to issue writ of certiorari or any other appropriate writ or order to quash the Order/Notice bearing No.EXE/IML/ KA.MA.E/90/KMR/2017-17 dated 24-05-2017 Annexure-E issued by the third respondent for cancellation of License in respect of Lacasa Bar and Restaurant situated katha No.877/1, 878/2, 895/19 and 896/20, 1st and 2nd Floor, Blooming Dale, Kasavanahalli, Carmala Ram Post, Bangalore-560035 as the same is illegal, arbitrary, unjust and in violation of the principles of natural justice apart from being contrary to Karnataka Excise (sale of Indian and Foreign Liquors) Rules, 1968 & etc.
These Writ Petitions having been reserved for orders
on 25/07/2017, coming on for pronouncement, this day,
Dr Vineet Kothari J., delivered the following:
J U D G M E N T
1. Though the controversy involved in the present
batch of petitions regarding levy of Penalty under Rule
14 (2) of the Karnataka Excise (Sale of Indian and
Foreign Liquor) Rules, 1968 (hereinafter called ‘Excise
Rules of 1968’ for brevity) is covered by an order
passed by this Court in Writ Petition No.10335/2017
(Lakshmi Bar and Restaurant Vs. The State of
Karnataka and others), decided on 27/06/2017, yet,
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the learned counsels for the petitioners urged this Court
to give them a further opportunity to raise certain
additional grounds in the matter and accordingly again
an opportunity was afforded to both the sides to address
their argument before Court.
2. The controversy in brief is regarding the
imposition of Penalty for the short-lifting of the
liquor during the period in question as against the
quantity prescribed under the Rule 14(2) of the Excise
Rules of 1968 from the sole Distributor of Liquor in the
State, viz. Karnataka State Beverages Corporation
Limited (KSBCL). The said Rule 14(2) of the Excise
Rules of 1968 which was inserted on the Statute Book
with effect from 01/04/2003 was omitted with effect
from 01/08/2014 and the demand in question of the
said Penalty which has been held to be in the nature of
a fiscal liability in the aforesaid judgment of this Court
is only for the different periods falling between these two
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dates when the said Rule was existing on the Statute
Book.
3. The relevant part of the aforesaid order passed
by this Court on 27/06/2017 is quoted herein below
again for ready reference:
“7. Having heard the learned counsels, this
court is of the opinion that the present Writ
Petition has no force and is liable to be
dismissed. The reasons are as follows.
8. Before deletion of Sub Rule (2) of Rule 14
of the Karnataka Excise (Sale of Indian &
Foreign liquor) Rules, 1968, although the
second proviso to the said Rule provided for
an opportunity of hearing to the licencee, if he
fails to lift the minimum quantity of liquor so
fixed per month, which quantity was
specified in the said rule itself, before the
penalty at the rate of Rs.100/- for every
bulk litre on the quantity short lifted, is
imposed and if there are two such
monthly defaults, the licence itself was
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liable to be cancelled and the second
proviso to Rule 14 provided that the licencing
authority shall give a reasonable opportunity
of being heard, before levying the penalty or
canceling the licence.
9. As stated above, the said Rule 14(2) itself
stands deleted from the statute book with
effect from 1.8.2014 and the impugned
demand notices and the order was passed by
the Deputy Commissioner are all after the
said deletion of the said Rule 14(2) of the
Rules. So no enforcement of that Proviso
can be claimed as of right now. Even
otherwise, this court is of the opinion that if
the petitioner had any objection to the fact of
the short lifting of the liquor, it was fully open
to her to raise such an objection after the first
demand notice Annexure-D dated 20.5.2016
was served upon her. But, not only after the
Annexure-D demand notice dated
28.5.2016, even after second demand notice
Annexure-E dated 16.8.2016, the
petitioner never raised any demur or
objection before the respondent – authority
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The Excise Commissioner in Karnataka and others
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against the demand of penalty for such short
lifting for condoning or waiving such penalty.
10. On the contrary, for seeking the renewal
of the licence for the next year 2016-17, she
gave a clear Undertaking before the
Department that she would pay the said
penalty for short lifting of the liquor for the
previous year 2015-16 vide Annexure-R1
dated 28.6.2016.
11. It is also seen from the perusal of Rule
14 which is quoted herein below in extenso
that it is not actually a penalty requiring any
mensrea or guilty animus on the part of the
licencee. It is rather a fiscal liability or
the price for deficit in full assured
supply to be taken as fixed on the
licencee to compensate the respondent –
Department or the authorized Distillery
company, for the short lifting of the
liquor. The said Rule was introduced in the
statute book to regulate the supply of only
authorized and properly manufactured liquor
from the authorized licencees only to avoid
the smuggling of illegal liquor into the market
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The Excise Commissioner in Karnataka and others
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through illegal outlets or source. To check
such a menace, if a liability is fixed under the
Rule for payment of price for the short lifted
quantity of liquor, the same cannot be said to
be a penalty requiring any guilty animus on
the part of the licencee so as to require prior
opportunity of hearing. The fact of short
lifting is to be computed as per the minimum
quantity prescribed under Rule 14 itself and
the rate of penalty of Rs.100/- per bulk litre
is also provided therein. Therefore, nothing
much can be achieved to the contrary by
giving an opportunity of hearing as
demanded in the present case for explaining
the reasons for such short lifting of the liquor,
attracting the imposition of penalty under
Rule 14(2) of the said Rules which now
stands deleted from the statute book itself
w.e.f. 1.8.2014. The said 2nd Proviso for
giving opportunity of hearing can be more
usefully pressed into service if the other
consequence under Rule 14(2) is to follow
namely the cancellation of licence itself and
therefore, the application of the said 2nd
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proviso should be limited for that part of first
proviso to Rule 14(2) of the said Rules.
“Rule 14 – Licensee to abide by the provisions of the Act etc.
[(1)] The licensee or his successors or
assignees shall have no claim
whatsoever to the continuance or
renewal of the licence as the case may
be, after the expiry of the period for
which such licence was granted.
[(2) The licensees holding retail shop
licenses in Form CL-2 and Bar licences
in Form CL-9 shall lift for sale [from a
distributor licensee (CL-11) or a
distributor licensee for vend of foreign
liquor (CL-11A)], the minimum quantity
of liquor (excluding fenny, wine and
beer) fixed per month for the shop
based on the license fee prescribed for
each type of license, overheads, other
expenses incurred, location of the shop,
area of operation, sale of liquor in the
previous years, and similar factors to
ensure that illicit liquor is not obtained
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by the licensees and sold in the shop, to
ensure that no attempt is made to
undersell the liquor and thereby
wholesome liquor obtained only from
authorized sources is sold to the
consumers. In case the licensee fail to
lift the minimum quantity of liquor so
fixed per month, he shall be liable to
pay a penalty at the rate of Rs.100.00
for every bulk litre on the quantity short
lifted:
Sl. No.
Type of Licence Licence fee Minimum quantity of liquor to be lifted in a month
(excluding fenny, wine and beer) (1 case = 9
B.L)
(01) Retail Shop (CL-2)
(a)City Municipal Corporation areas having population more than 20
Rs. 2,23,000
47 cases or 423 bulk litres
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Lakhs
(b) Other city Municipal Corporation areas
(c) City Municipal Council Areas
(d) Town Municipal Council/Town Panchayat Areas
(e) Other Areas
Rs. 1,82,000
Rs. 1,65,000
Rs. 1,25,000
Rs. 1,00,000
44 cases or 396 bulk litres
38 cases or 342 bulk litres
32 cases or 288 bulk litres
23 cases 207 bulk litres.
(02) Refreshment Room (Bar) (CL-9)
(a)City Municipal Corporation
areas having population more than 20 Lakhs:
(b) Other city Municipal Corporation
areas
(c) City Municipal Council Areas
(d) Town Municipal
Council/Town Panchayat
Rs.
3,00,000 Rs.
2,31,000 Rs. 1,82,000
Rs. 1,30,000
52 cases or 468 bulk litres
47 cases or 423
bulk litres
42 cases or 378 bulk litres
34 cases or 2306 bulk litres
25 cases 225
bulk litres.
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Provided that in case the licensee
fails to lift the minimum quantity so
fixed consecutively for two months, the
license may liable to be cancelled:
Provided further that the licensing
Authority shall give the licensee, a
reasonable opportunity of being heard
before levying the penalty or canceling
the license.
The minimum quantity of liquor
(excluding fenny, wine and beer) to be
lifted in a month by a CL-2 (Retail
shop)/ CL-9 (Bar) licensee is as
follows:
12. From the facts in the present case, it is
not seen anywhere that the petitioner had
raised any objection or has given any
explanation suitable or otherwise for such
short lifting of the liquor from the respondent –
Department or its authorized
Areas
(e) Other Areas
Rs. 1,00,000
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licencee/manufacturer. Even if the principles
of natural justice were to be complied with as
argued by the learned counsel for the
petitioner, the same cannot yield anything in
the facts of the present case. Being already
aware of the fact situation, the petitioner was
expected at least to raise the objection or give
the reasons for such short lifting of the liquor,
but nothing of this sort is seen in the present
case.
13. On the other hand, the petitioner
seems to have even concealed the
material facts from this court, interalia,
the fact of the subsequent order having been
passed on the Undertaking given by the
petitioner herself on 28.06.2016 and such
order having been passed by the Deputy
Commissioner on 30.06.2016.
14. Thus the petitioner has presented this
Writ Petition with incomplete picture of the
facts.
15. It is well settled that those who have
approached under Article 226 of the
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Constitution of India, exercising writ
jurisdiction has to come to the court with
absolutely clean hands and complete facts
presented to the Court and if the court finds
that there is a concealment of material facts,
the court can refuse to go into the merits of the
case at all and dismiss such Writ Petition only
on the short ground of concealment of material
facts.
16. In either of the case, this court is not
inclined to entertain this petition on the short
ground of alleged breach of principles of
natural justice and on the contrary, this court
is fully satisfied that the case does not merit
any relief in the present case. Therefore, the
Writ Petition is liable to be dismissed.
Accordingly, the petition is dismissed. No costs.”
4. Mr. K.P. Kumar, learned Senior Counsel and
other counsels appearing for the petitioners made the
following submission despite the aforesaid judgment
before this Court for consideration by this Court:
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I. That with the omission and deletion of the said
provisions of Rule 14(2) of the Excise Rules of 1968
with effect from 01/08/2014, since the proceedings for
recovery of the Penalty for short-lifting of the liquor have
been initiated after the said date of 01/08/2014,
therefore, in view of the following Supreme Court
decisions by the Constitution Benches, such
proceedings could not be initiated or continued, even if
they were initiated prior to 01/08/2014;
(i) M/s. Rayala Corporation (P)
Ltd. And Another Vs. The Director of
Enforcement, New Delhi (AIR 1970 SC
494);
(ii) Kolhapur Canesugar Works
Ltd. And Another Vs. Union of India and
others (AIR 2000 SC 811);
II. That the impugned demand notices for the
said Penalty under Rule 14(2) of the Excise Rules of
1968 have been issued without giving any opportunity
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of hearing to the petitioners and since such short-lifting
of the liquor could depend upon or caused by several
factors therefore an opportunity in this regard ought to
have been provided by the Respondent Authority to the
petitioners.
III. That the imposition of Penalty at fixed rate of
Rs.100/- per bulk litre and some of them may be costly
and some may be of cheaper rates and therefore the
“loss of revenue” allegedly caused to the Respondent –
State on account of such short-lifting of the liquor was a
question of fact to be determined by the Respondent –
Assessing Authority for which a notice and opportunity
of hearing was necessary and therefore, the aforesaid
rate of Penalty at the rate of Rs.100/- per bulk litre
cannot be justified in all the cases alike.
IV. Since Rule 14 (2) of the Excise Rules of
1968 for levy of such Penalty is a charging provision
therefore with its omission and deletion with effect from
01/08/2014, neither the alleged offence for short-lifting
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of the liquor remains on the Statute Book nor the
charging provision for levy of the same even as a fiscal
liability remains and therefore the proceedings
determining such liability for the petitioners and the
question of recovery of the same does not arise after
01/08/2014.
5. Mr. K.P. Kumar, learned Senior Counsel
submitted before the Court that in the case of M/s.
Rayala Corporation (P) Ltd. (supra), in a case relating
to prosecution under the provisions of Foreign
Exchange Regulation Act, 1947 (hereinafter referred
to as ‘FERA’ for short), the Hon’ble Supreme Court
considered the question whether the proceedings for
prosecution of the delinquent could be validly continued
under Rule 132-A of Defence of India Rules 1962
after the said Rule 132-A as a whole ceased to be in
existence as a result of the Notification issued by the
Ministry of Home Affairs on 30/03/1965.
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6. Mr. Kumar submitted that the said question
was answered in the negative by the Hon’ble Supreme
Court in the following manner. The relevant extract
from paragraphs 12 and 14 of the said judgment in the
case of M/s. Rayala Corporation (P) Ltd. (supra) are
quoted below for ready reference.
“12. There remains for consideration the
question whether proceedings could be
validly continued on the complaint in respect
of the charge under Rule132-A (4) of the D.I.
Rs. against the two accused. The two
relevant clauses of Rule 132-A are as
follows:
“132A. (2) No person other than an
authorized dealer shall buy or otherwise
acquire or borrow from, or sell or otherwise
transfer or lend to, or exchange with, any
person not being an authorized dealer, any
foreign exchange.
(4) If any person contravenes any of the
provisions of this rule, he shall be punishable
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with imprisonment for a term which may
extend to two years, or with fine, or with
both; and any Court trying such
contravention may direct that the foreign
exchange in respect of which the Court is
satisfied that this rule has been contravened,
shall be forfeited to the Central Government.”
The charge in the complaint against the
two accused was that they had acquired
foreign exchange to the extent of Sw.Krs.
88,913.09 in violation of the prohibition
contained in Rule 132A (2) during the period
when this Rule was in force, so that they
became liable to punishment under Rule
132A (4). Rule 132-A as a whole ceased to
be in existence as a result of the
notification issued by the Ministry of
Home Affairs on 30th March, 1965, by
which the Defence of India (Amendment)
Rules, 1965 were promulgated. Clause 2 of
these Amendment Rules reads as under:-
“In the Defence of India Rules, 1962, Rule
132A (relating to prohibition of dealings in
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foreign exchange) shall be omitted except as
respects things done or omitted to be
done under that rule.”
The argument of Mr. Sen was that, even if
there was a contravention of Rule 132A (2) by
the accused when that Rule was in force, the
act of contravention cannot be held to be
a “thing done or omitted to be done
under that rule,” so that, after that rule
has been omitted, no prosecution in
respect of that contravention can be
instituted. He conceded the possibility that,
if a prosecution had already been started
while Rule 132A was in force, that
prosecution might have been competently
continued. Once the Rule was omitted
altogether, no new proceeding by way of
prosecution could be initiated even
though it might be in respect of an
offence committed earlier during the
period that the rule was in force. We are
inclined to agree with the submission of Mr.
Sen that the language contained in clause 2
of the Defence of India (Amendment) Rules,
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1965 can only afford protection to action
already taken while the rule was in
force, but cannot justify initiation of a
new proceeding which will not be a thing
done or omitted to be done under the rule but
a new act of initiating a proceeding after the
rule had ceased to exist. On this
interpretation, the complaint made for the
offence under Rule 132A (4) of the D.I.
Rs., after 1st April, 1965 when the rule
was omitted, has to be held invalid.”
“14. On the other hand, Mr. Desai on behalf
of the respondent relied on a decision of the
Privy Council in Wicks v. Director of
Public Prosecutions, 1947 AC 362. In that
case, the appellant, whose case came up
before the Privy Council, was convicted for
contravention of Regulation 2A of the Defence
(General) Regulations framed under the
Emergency Powers (Defence) Act, 1939 as
applied to British subjects abroad by section
3 (1 )(b) of the said Act. It was held that, at
the date when the acts, which were the
subject-matter of the charge, were
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committed, the regulation in question
was in force, so that, if the appellant
had been prosecuted immediately
afterwards, the validity of his conviction
could not be open to any challenge at
all. But the Act of 1939 was a temporary
Act, and after various extensions it expired
on February 24, 1946. The trial of the
accused took place only in May 1946, and he
was Convicted and sentenced to four years'
penal servitude on May 28. In these
circumstances, the question raised in the
appeal was: "Is a man entitled to be acquitted
when he is proved to have broken a Defence
Regulation at a time when that regulation
was in operation, because his trial and
conviction take place after the regulation has
expired?" The Privy Council took notice of
sub- section (3) of Section 11 of the
Emergency Powers (Defence) Act, 1939
which laid down that "the expiry of this
Act shall not affect the operation thereof
as respects things previously done or
omitted to be done". It was argued
before the Privy Council that the phrase
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"things previously done" does not cover
offences previously committed. This argument
was rejected by Viscount Simon on behalf of
the Privy Council and it was held that the
appellant in that case could be convicted in
respect of the offence which he had
committed when the regulation was in force.
That case, however, is distinguishable from
the case before us inasmuch as, in that case,
the saving provision laid down that the
operation of that Act itself was not to be
affected by the expiry as respects things
previously done or omitted to be done. The
Act could, therefore, be held to be in operation
in respect of acts already committed, so that
the conviction could be validly made even
after the expiry of the Act in respect of an
offence committed before the expiry. In the
case before us, the operation of Rule
132A of the D.I. Rs. has not been
continued after its omission. The
language used in the notification only
affords protection to things already done
under the rule, so that it cannot permit
further application of that rule by
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instituting a new prosecution in respect
of something already done. The offence
alleged against the accused in the present
case is in respect of acts done by them which
cannot be held to be acts under that rule. The
difference in the language thus makes it clear
that the principle enunciated by the Privy
Council in the case cited above cannot apply
to the notification with which we are
concerned.”
The said judgment relating to ‘offence’ and
‘prosecution’ for alleged breach of Rule 132-A of Defence
of India Rules is quite distinguishable from the facts of
the present case where this question is of compensation
to the State for loss of Revenue caused by short-lifting
of liquor quantity under Rule 14(2) of the Excise Rules
of 1968 is involved.
7. The second case decided by the Constitution
Bench of the Hon’ble Supreme Court in the case of
Kolhapur Canesugar works (supra) and relied upon by
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Mr. Kumar pertain to the provisions for levy of Excise
Duty under the provisions of the Central Excise Act,
1944. Under Section 11-A of the said Act read with
Rule 10 and 10-A of Central Excise Rules (omitted by
Notification dated 06/08/1977) was involved in the
case.
8. The Hon’ble Supreme Court extracted the Show
Cause Notice given to the assessee in para.8 of the
judgment as under:
“8. As the matter stood thus the notice
dated 27th April, 1977 was issued by the
Superintendent, Central Excise, A.G. - I
Kolhapur, which reads as follows :
"NOTICE TO SHOW CAUSE
To
M/s. Kolhapur Canesugar Works Ltd.
Kashba Savada, Kolhapur
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Whereas the Kolhapur Cane Sugar Works
Ltd., Kolhapur Holder of L4 No.2/Sug/93
had presented their claim on 12.7.76 for
rebate of Central Excise duty on sugar
produced in excess during the season
1973-74 by them as new factory
commencing production for the first time
after 1-10-1973 as per provision of S. No.6
of the table of notification No. 189/73 dated
4-10-1973 and that they were granted a
rebate of Rs.61,14,930/- by the
Superintendent, Central Excise, AGI Kolhapur
vide his letter No. Rebate KCW/73-74/76,
dated 23-7-76 and that they had accordingly
taken credit of the said amount in their PLA.
Whereas now on re-examination of the
facts and circumstances connected with the
said rebate claim, it appears that M/s. The
Kolhapur Canesugar Works Ltd.
Kolhapur are merely a subsidiary of the
holding Company viz. M/s. The Kolhapur
Sugar Mills Ltd., Kolhapur, are the owners
of the subsidiary, since all the share issued
by the subsidiary company are purchased by
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them. M/s. Kolhapur Cane Sugar Works Ltd.,
Kolhapur, after formation, have continued
the manufacturing of sugar at and with
the existing and running factory of M/s.
Kolhapur Sugar Mills Ltd., Kolhapur.
Though M/s. Kolhapur Cane Sugar Works
Ltd., Kolhapur obtained a new licence for
the manufacture of sugar, they have not
installed and commissioned working the
new factory. It appears that only the
existing factory has change hands and that
the receiving firm is fully owned by
transferring firm. Therefore, M/s. Kolhapur
Cane Sugar Works Ltd., Kolhapur cannot
be considered as a new factory and that
they commenced manufacturing of sugar
for the first time after 1-10-1973. M/s.
Kolhapur Cane Sugar Works Ltd.,
Kolhapur, do not thus appear to be
entitled to the rebate sanctioned to him
as a new factory.
Whereas it appears that M/s. Kolhapur Cane
Sugar Works Ltd., Kolhapur are not eligible
to rebate for the season 73-74 under any
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other provisions of the notification No. 189/73
dated 4-10-73.
2. Now therefore M/s. Kolhapur Cane Sugar
Works Ltd., Kolhapur are hereby required to
show cause the Assistant Collector, Central
Excise Kolhapur, why the rebate of
Rs.61,14,930/- erroneously sanctioned and
allowed to the credited to their PLA by the
Superintendent under his letter No.
Rebate/KCW/73-74/76 dated 23-7-73,
should not be recovered from them under
Rule 10-A of the Central Excise Rules,
1944.
3. M/s. the Kolhapur Cane Sugar Works Ltd.,
Kolhapur, are further directed to produce at the
time of showing cause all the evidence upon
which they intend to rely in support of their
defence.
4. M/s. Kolhapur Cane Sugar Works Ltd.,
Kolhapur should indicate in the written
explanation whether they wish to be heard in
person before the case is decided. If no
mention is made about this in their written
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explanation, it would be presumed that they do
not desire a personal hearing.
5. If no cause is shown against the action
proposed to be taken within ten days of the
receipt of this notice, or they do not appear
before the Assistant Collector, Central Excise,
Kolhapur, when the case posted for hearing,
the case will be decided on ex-parte.
Sd/ 27-4-77
Superintendent, Central Excise, AGI,
Kolhapur"
9. In the aforesaid factual backdrop, the Hon’ble
Supreme Court held in paragraphs 13 to 15 as under:-
“13. As noted earlier, prior to 6th August,
1977 the relevant provisions in the rule were
Rules 10 and 10-A. In Rule 10 a provision
was made for recovery of duties or
charges short-levied or erroneously
refunded. It was laid down therein that
when duties or charges have been short-
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levied through inadvertence, error, collusion,
or misconstruction on the part of an officer, or
through misstatement as to the quantity,
description or value of such goods on the part
of the owners, or when any such duty or
charge, after having been levied, has been
owing to any such cause, erroneously
refunded, the proper officer may, within
three months from the date on which the
duty or charge was paid or adjusted in
the owner's account-current, if any, or
from the date of making the refund,
serve a notice on the person from whom
such deficiency in duty or charges is or
are recoverable requiring him to show
cause to the Assistant Collector of Central
Excise why he should not pay the amount
specified in the notice. In sub-rule (2) of Rule
10 the Assistant Collector of Central Excise
was vested with the power to pass
appropriate order determining the amount of
duty or charges due from such person and
thereupon such person was to pay the
amount so determined within 10 days from
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the date on which he is required to pay within
the period specified.
14. Rule 10-A contained the provision
regarding residuary powers for recovery
of sums due to Government where the
Rules do not make any specific provision
for the collection of any duty, or of any
deficiency in duty or of any other sum of any
kind payable to the Central Government
under the Act. The procedure laid down in
this rule was similar to Rule 10 i.e. issue of a
show-cause notice for determination of the
amount due, etc.
15. Rules 10 and 10-A were omitted and
a new provision was introduced by Rule
10 with effect from 6th August 1977. In
the said Rule a period of 6 months was
prescribed for initiating action for realisation
of the duty which has not been levied or paid
or has been short levied, erroneously
refunded or any duty assessed has not been
paid in full. No provision regarding
residuary power was made in the Rules.”
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10. Further, the Hon’ble Supreme Court
considered the applicability of Section 6 of the General
Clauses Act and the case of M/s. Rayala Corporation
Limited (supra) in para 22 of the judgment and held
that the earlier view in the decisions of the Gujarat High
Court in Saurastra Chemicals Case and the
Karnataka High Court in the case of Falcon Tyres Ltd.
was not sound in law.
11. The Hon’ble Supreme Court in Kolhapur
Canesugar Works Ltd. (supra) observed in paragraphs
32 to 35 as follows:
“ 32. We have carefully considered the
decisions in Saurashtra Cement and
Chemical Industries, (1993 (42) ECC 126)
(Gujarat) (FB) (supra) and Falcon Tyres case
(1992 (60) ELT 116) (Kant.) (supra). Though
the judgments in these cases were rendered
after the decision of the Constitution Bench in
Rayala Corporation Pvt. Ltd., (AIR 1970 SC
494: 1970 Crl LJ 588) (supra) a different view
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has been taken by the High Courts for the
reasons stated in the judgments. The Full
Bench of the Gujarat High Court in
Saurashtra Cement and Chemical Industries,
(1993 (42) ECC 126) (supra), as it appears
from the discussions in the judgment, tried to
distinguish the decision of the Constitution
Bench in M/s. Rayala Corporation (supra)
for reasons, we are constrained to say
not sound in law. The decision of the
Constitution Bench is directly on the
question of applicability of Section 6 of
the General Clauses Act in a case where
a rule is deleted or omitted by a
notification and the question was
answered in the negative. The
Constitution Bench said that "Section 6
only applies to repeals and not to
omissions, and applies when the repeal is of
a Central Act or Regulation and not of a
Rule". (page 656 of the Supreme Court
Report).”
33. The Full Bench appears to have lost sight
of the position that all the relevant terms i.e.
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'Central Act', 'Enactment' 'Regulation', and
'Rule' are defined in Sub-section 3(7), 3(19),
3(5), 3(50) and 3(51) respectively of the
General Clauses Act. When the term Central
Act or Regulation or Rule is used in that Act
reference has to be made to the definition of
that term in the statute. It is not possible nor
permissible to give a meaning to any of the
terms different from the definition. It is
manifest that each term has a distinct and
separate, meaning attributed to it for the
purpose of the Act. Therefore, when the
question to be considered is whether a
particular provision of the Act applies in a
case then the clear and unambiguous
language of that provision has to be given its
true meaning and import. The Full Bench has
equated a 'rule' with 'statute'. In our
considered view this is impermissible in view
of the specific provisions in the Act. When the
legislature by clear and unambiguous
language has extended the provision of
section 6 to cases of repeal of a 'Central Act' or
'Regulation', it is not possible to apply the
provision to a case of repeal of a 'Rule'. The
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position will not be different even if the rule
has been framed by virtue of the power vested
under an enactment; it remains a 'rule' and
takes its colour from the definition of the term
in the Act (General Clauses Act). At the cost of
repetition we may say that the omissions in
the judgment in M/s. Rayala Corporation
(supra) pointed out in paragraph 17 of the
judgment of the Full Bench have no substance
as they are not relevant for determination of
the question raised for the reasons stated
herein.
34. In paragraph 21 of the judgment the Full
Bench has noted the decision of a Constitution
Bench of this Court in Chief Inspector of Mines
v. ICC. Thapar, AIR (1961) SC 838 and has
relied upon the principles laid down therein.
The Full Bench overlooked the position that
that was a case under section 24 of the
General Clauses Act which makes provision
for continuation of orders, notification,
scheme, rule, form or bye-law, issued under
the repealed Act or Regulation under an Act
after its repeal and re- enactment. In that case
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section 6 did not come up for consideration.
Therefore the ratio of that case is not
applicable to the present case. With respect
we agree with the principles laid down by
the Constitution Bench in M/s. Rayala
Corporation case (supra). In our considered
view the ratio of the said decision squarely
applies to the case on hand.
35. For the reasons set forth above we do
not accept the view taken in Saurashtra
Cement and Chemical Industries Ltd.,
(1993 (42) ECC 126) (Gujarat) (FB) (supra),
in Falcon Tyres Ltd., (1992 (60) ELT 116)
(Kant) (supra) and the other decisions taking
similar view. It is not correct to say that in
considering the question of maintainability of
pending proceedings initiated under a
particular provision of the rule after the said
provision was omitted the Court is not to look
for a provision in the newly added rule for
continuing the pending proceedings. It is
also not correct to say that the test is
whether there is any provision in the
rules to the effect that pending
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proceedings will lapse on omission of the
rule under which the notice was issued.
It is our considered view that in such a case
the Court is to look to the provisions in the
rule which has been introduced after
omission of the previous rule to determine
whether a pending proceeding will continue
or lapse. If there is a provision therein that
pending proceedings shall continue and be
disposed of under the old rule as if the rule
has not been deleted or omitted then such a
proceeding will continue. If the case is
covered by Section 6 of the General
Clauses Act or there is a pari materia
provision in the statute under which the rule
has been framed in that case also the
pending proceeding will not be affected
by omission of the rule. In the absence of
any such provision in the statute or in
the rule the pending proceedings would
lapse on the rule under which the notice
was issued or proceeding was initiated
being deleted/omitted. It is relevant to note
here that in the present case the question of
divesting the Revenue of a vested right
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does not arise since no order directing
refund of the amount had been passed on the
date when Rule 10 was omitted.”
This judgment is not applicable to the present
case before this Court as there the question was of
recovery of refund wrongly given to petitioner, under
Rule 10 and 10-A, after their deletion from Statute
Book with effect from 06/08/1977 in re-enacted Rule
10 (Rule 10-A was not re-enacted), no such provision for
such recovery was made. But in the present case, no
re-enactment of Rule 14(2) of the Excise Rules of 1968
is there after 01/08/2014 and the only question is that
whether the proceedings for recovery for the period
when the Rule 14 (2) was very much on Statute Book
can be initiated and continued or not. The answer has
to be given in affirmative on the basis of applicability of
Section 6 of theGeneral Clauses Act, 1897 and such
levy cannot be allowed to lapse merely because the
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provisions of Rule 14 (2) was deleted with effect from
01/08/2014.
12. Both the aforesaid judgments relied upon by
the learned Senior Counsel, Mr. Kumar in the case of
M/s.Rayala Corporation (P) Ltd. and Kolhapur
Canesugar Works Ltd.(supra) were held to be with
regard to effect of omission of Rule being not treated as
“repeal” saving the Acts done under the repealed
provision by virtue of Section 6 of the General Clauses
Act, 1897, in later judgments, but it seems that
complete upto date research of the relevant case laws
was not made by the learned counsels for the
petitioners, and these were brought to the notice of the
learned counsel for petitioners from Court side.
13. These two Constitutional Bench judgments
were held to be on aforesaid issue in the later
judgments in the cases of Fibre Boards Private
Limited, Bangalore Vs. Commissioner of Income
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Tax, Bangalore [(2015) 10 SCC 333] = 2015 376 ITR
596 and which was affirmed and followed in a still later
decision of the Hon’ble Supreme Court in the case of
Shree Bhagwati Steel Rolling Mills Vs.
Commissioner of Central Excise and another [(2016)
3 SCC P.643]. The following extracts from these
aforesaid two judgments quoted below after noticing
the below quoted provisions of Sections 2 (19), 2(50),
2(51) 6, 6-A and 24 of the General Clauses Act, 1987.
2(19): “enactment” shall include a
Regulation (as hereinafter defined) and any
Regulation of the Bengal, Madras or Bombay
Code, and shall also include any provision
contained in any Act or in any such
Regulation as aforesaid;
2(51): “ rule” shall mean a rule made in
exercise of a power conferred by any
enactment, and shall include a Regulation
made as a rule under any enactment;
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2(50): “Regulation” shall mean a Regulation
made by the President [under article 240 of
the Constitution and shall include a
Regulation made by the President under
article 243 thereof and] a Regulation made by
the Central Government under the
Government of India Act, 1870, or the
Government of India Act, 1915, or the
Government of India Act, 1935.
6. Effect of repeal. – Where this Act,
or any (Central Act) or Regulation made after
the commencement of this Act, repeals any
enactment hitherto made or hereafter to be
made, then, unless a different intention
appears, the repeal shall not -
(a) revive anything not in force or existing
at the time at which the repeal takes effect; or
(b) affect the previous operation of any
enactment so repealed or anything duly
done or suffered thereunder; or
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(c) affect any right, privilege, obligation or
liability acquired, accrued or incurred
under any enactment so repealed; or
(d) affect any penalty, forfeiture or
punishment incurred in respect of any offence
committed against any enactment so
repealed; or
(e) affect any investigation, legal
proceeding or remedy in respect of any such
right, privilege, obligation, liability, penalty,
forfeiture or punishment as aforesaid,
and any such investigation, legal proceeding
or remedy may be instituted, continued or
enforced, and any such penalty, forfeiture or
punishment may be imposed as if the
repealing Act or Regulation had not been
passed.
[6-A. Repeal of Act making textual
amendment in Act or Regulation:-
Where any [Central Act] or Regulation made
after the commencement of this Act repeals
any enactment by which the text of any
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[Central Act] or Regulation was amended by
the express omission, insertion or substitution
of any matter, then, unless a different
intention appears, the repeal shall not affect
the continuance of any such amendment
made by the enactment so repealed and in
operation at the time of such repeal]
24. Continuation of orders, etc., issued
under enactments repealed and re-
enacted.-
Where any (Central Act) or Regulation,
is, after the commencement of this Act,
repealed and re-enacted with or without
modification, then, unless it is otherwise
expressly provided any (appointment
notification,) order, scheme, rule, form or bye-
law, (made or ) issued under the repealed Act
or Regulation, shall, so far as it is not
inconsistent with the provisions re-enacted,
continue in force and be deemed to have been
(made or) issued under the provisions so re-
enacted, unless and until it is superseded by
any (appointment, notification,) order,
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scheme, rule, form or bye-law, (made or)
issued under the provisions so re-enacted
(and when any (Central Act) or Regulation,
which, by a notification under Section 5 or 5A
of the Scheduled Districts Act, 1874, (14 of
1874) or any like law, has been extended to
any local area, has, by a subsequent
notification, been withdrawn form the re-
extended to such area or any part thereof, the
provisions of such Act or Regulations shall be
deemed to have been repealed and re-
enacted in such area or part within the
meaning of this Section).
14. The definitions of enactment, Rule,
Regulation and Repeal from Mysore General Clauses
Act, 1899 are also quoted below:
2(19): “enactment” shall include a
Regulation (as hereinafter defined) and any
Regulation of the Bengal, Madras or Bombay
Code, and shall also include any provision
contained in any Act or in any such
Regulation as aforesaid;
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2(51): “ rule” shall mean a rule made in
exercise of a power conferred by any
enactment, and shall include a Regulation
made as a rule under any enactment;
2(50): “Regulation” shall mean a Regulation
made by the President [under Article 240 of
the Constitution and shall include a
Regulation made by the President under
Article 243 thereof and] a Regulation made by
the Central Government under the
Government of India Act, 1870, or the
Government of India Act, 1915, or the
Government of India Act, 1935.
6. Effect of repeal. – Where this Act,
or any (Central Act) or Regulation made after
the commencement of this Act, repeals any
enactment hitherto made or hereafter to be
made, then, unless a different intention
appears, the repeal shall not -
(f) revive anything not in force or existing
at the time at which the repeal takes effect; or
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(g) affect the previous operation of any
enactment so repealed or anything duly done
or suffered thereunder; or
(h) affect any right, privilege, obligation or
liability acquired, accrued or incurred under
any enactment so repealed; or
(i) affect any penalty, forfeiture or
punishment incurred in respect of any offence
committed against any enactment so
repealed; or
(j) affect any investigation, legal
proceeding or remedy in respect of any such
right, privilege, obligation, liability, penalty,
forfeiture or punishment as aforesaid,
and any such investigation, legal proceeding
or remedy may be instituted, continued or
enforced, and any such penalty, forfeiture or
punishment may be imposed as if the
repealing Act or Regulation had not been
passed.
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[6-A. Repeal of Act making textual
amendment in Act or Regulation:-
Where any [Central Act] or Regulation
made after the commencement of this Act
repeals any enactment by which the text of
any [Central Act] or Regulation was amended
by the express omission, insertion or
substitution of any matter, then, unless a
different intention appears, the repeal shall
not affect the continuance of any such
amendment made by the enactment so
repealed and in operation at the time of such
repeal]
15. The Hon’ble Supreme Court in the case of
Fibre Boards Private Limited (supra) not only held
that the view in the cases of M/s. Rayala Corporation
(P) Ltd. and Kolhapur Canesugar Works Ltd. (supra)
was not only an obiter dicta with regard to express
omissions of enactment or Rule, but even an attempt
made for referring the matter to the larger bench in the
case of General Finance Company Vs. CIT (2002) 7
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SCC 1 was negatived by the Hon’ble Supreme Court in
the case of Fibre Boards Private Limited (supra). The
following extract from paragraphs 25 to 33 of the said
judgment is quoted below for ready reference.
25. In Rayala Corpn. (P) Ltd., what
fell for decision was whether proceedings
could be validly continued on a complaint in
respect of a charge made under Rule 132-
A of the Defence of India Rules, which
ceased to be in existence before the accused
were convicted n respect of the charge made
under the said Rule. The said Rule 132-A
was omitted by a Notification dated 30-3-
1966. What was decided in that case is set
out by para 17 of the said judgment, which is
as follows: (SCC p.424)
“17. Reference was next made to a
decision of the Madhya Pradesh High
Court in State of M.P. v. Hiralal
Sutwala but, there again, the accused
was sought to be prosecuted for an
offence punishable under an Act on
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the repeal of which Section 6 of the
General Clauses Act had been made
applicable. In the case before us,
Section 6 of the General Clauses Act
cannot obviously apply on the
omission of Rule 132-A of the DIRs for
the two obvious reasons that Section 6
only applies to repeals and not to
omissions, and applies when the
repeal is of a Central Act or Regulation
and not of a Rule. If Section 6 of the
General Clauses Act had been applied,
no doubt this complaint against the
two accused for the offence punishable
under Rule 132-A of the DIRs could
have been instituted even after the
repeal of that Rule.”
26. It will be clear fro a reading of
this paragraph that the Madhya Pradesh
High Court judgment was distinguished by
the Constitution Bench on two grounds. One
being that Section 6 of the General
Clauses Act does not apply to a rule but
only applies to a Central Act or
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Regulation, and secondly, that Section 6
itself would apply only to a “repeal” not
to “an omission.” This statement of law
was followed by another Constitution Bench
in Kolhapur Canesugar Works Ltd. case.
After setting out para 17 of the earlier
judgment, the second Constitution Bench
judgment states as follows: (SCC p.550, para
33)
“33. In para 21 of the judgment
the Full Bench has noted the decision
of a Constitution Bench of this Court
in Chief Inspector of Mines v.
Karam Chand Thapar and has
relied upon the principles laid down
therein. The Full Bench
overlooked the position that that
was a case under Section 24 of
the General Clauses Act which
makes provision for continuation
of orders, notification, scheme,
rule, form or bye-law, issued
under the repealed Act or
regulation under an Act after its
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repeal and re-enactment. In that
case Section 6 did not come up for
consideration. Therefore the ratio of
that case is not applicable to the
present case. With respect we
agree with the principle laid
down by the Constitution Bench
in Rayala Corpn. case. In our
considered view the ratio of the said
decision squarely applies to the case
on hand.”
27. Kolhapur Canesugar Works
Ltd. judgment also concerned itself with the
applicability of Section 6 of the General
Clauses Act to the deletion of Rules 10 and
10-A of the Central Excise Rules on 6-8-1977.
28. An attempt was made in General
Finance Co. v. CIT to refer these two
judgments to a larger Bench on the point that
an omission would not amount to a repeal for
the purpose of Section 6 of the General
Clauses Act. Though the Court found
substance in the argument favouring the
reference to a larger Bench, ultimately it
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decided that the prosecution in cases of non-
compliance with the provision therein
contained was only transitional and cases
covered by it were few and far between, and
hence found on facts that it was not an
appropriate case for reference to a larger
Bench.
29. We may also point out that in G.P.
Singh’s Principles of Statutory
Interpretation, 12th Edn., the learned
author has criticized the aforesaid
judgments in the following terms:
“Section 6 of the General Clauses
Act applies to all types of repeals.
The section applies whether the repeal be
express or implied, entire or partial or
whether it be repeal simpliciter or repeal
accompanied by fresh legislation. The
Section also applies when a temporary
statute is repealed before its expiry, but
it has no application when such a
statute is not repealed but comes to
an end by expiry. The section on its
own terms is limited to a repeal brought
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about by a Central Act or Regulation. A
rule made under an Act is not a
Central Act or Regulation and if a
rule be repealed by another rule,
Section 6 of the General Clauses Act
will not be attracted. It has been so
held in two Constitution Bench decisions.
The passing observation in these cases
that “Section 6 only applies to repeals
and not to omissions’ needs
reconsideration for omission of a
provision results in abrogation or
obliteration of that provision in the
same way as it happens in repeal.
The stress in these cases was on the
question that a ‘rule’ not being a
Central Act or Regulation, as defined
in the General Clauses Act, omission
or repeal of a ‘rule’ by another ‘rule’
does not attract Section 6 of the Act
and proceedings initiated under the
omitted rule cannot continue unless the
new rule contains a saving clause to that
effect.” (at pp.697-98).
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30. In view of what has been stated
hereinabove, perhaps the appropriate course
in the present case would have been to refer
the aforesaid judgment to a larger Bench.
But we do not find the need to do so in view
of what is stated by us hereinbelow.
31. First and foremost, it will be
noticed that two reasons were given in
Rayala Corpn. (P) Ltd. for distinguishing the
Madhya Pradesh High Court judgment.
Ordinarily, both reasons would form the ratio
decidendi for the said decision and both
reasons would be binding upon us. But we
find that once it is held that Section 6 of
the General Clauses Act would itself not
apply to a rule which is subordinate
legislation as it applies only to a Central
Act or Regulation, it would be wholly
unnecessary to state that on a construction of
the word “repeal” in Section 6 of the General
Clauses Act, “omission” made by the
legislature would not be included. Assume,
on the other hand, that the Constitution
Bench had given two reasons for the non-
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applicability of Section 6 of the General
Clauses Act. In such a situation, obviously
both reasons would be ratio decidendi and
would be binding upon a subsequent Bench.
However, once it is found that Section 6 itself
would not apply, it would be wholly
superfluous to further state that on an
interpretation of the word “repeal”, an
“omission” would not be included. We are,
therefore, of the view that the second so-
called ratio of the Constitution Bench in
Rayala Corpn. (P) Ltd. cannot be said to
be a ratio decidendi at all and is really
in the nature of obiter dicta.
32. Secondly, we find no reference to
Section 6-A of the General Clauses Act in
either of these Constitution Bench judgments.
Section 6-A reads as follows:
“ 6-A. Repeal of Act making
textual amendment in Act or
Regulation:-
Where any [Central Act] or Regulation
made after the commencement of this
Act repeals any enactment by which
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the text of any [Central Act] or
Regulation was amended by the
express omission, insertion or
substitution of any matter, then, unless
a different intention appears, the repeal
shall not affect the continuance of any
such amendment made by the
enactment so repealed and in operation
at the time of such repeal]
33. A reading of this Section would
show that a repeal by an amending Act can
be by way of an express omission. This
being the case, obviously the word “repeal” in
both Section 6 and Section 24 would,
therefore, include repeals by express
omission. The absence of any reference to
Section 6-A, therefore, again undoes the
binding effect of these two judgments on
an application of the per incuriam
principle.”
16. In a later case in the case of Shree Bhagwati
Steel Rolling Mills (supra), it was again argued before
the Hon’ble Supreme Court that the judgment in the
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case of Fibre Boards Private Limited (supra) also
requires reconsideration. But negativing the said
contention and following its earlier view in the case of
Fibre Boards Private Limited (supra), the Hon’ble
Supreme Court in the case of Shree Bhagwati Steel
Rolling Mills(supra) again reiterated the position
relating to “repeal” and “omission” and “enactment”
including “Regulations” held as under:
“12. From this it is clear that when
Section 6 of the General Clauses Act speaks
of the repeal of any enactment, it refers not
merely to the enactment as a whole but also
to any provision contained in any Act. Thus,
it is clear that if a part of a statute is
deleted. Section 6 would nonetheless
apply. Secondly it is clear, as has been
stated by referring to a passage in
Halsbury’s Laws of England in Fibre
Board judgment, that the expression
“omission” is nothing but a particular
form of words evincing an intention to
abrogate an enactment or portion
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thereof. This is made further clear by the
Legal Thesaurus (Deluxe Edition) by William
C. Burton, 1979 Edition. The expression
“Delete” is defined by the Thesaurus as
follows:
“Delete: - Blot out, cancel, censor, cross
off, cross out, cut, cut out, dele, discard, do
away with, drop, edit out, efface, elide,
eliminate, eradicate, erase, excise, expel,
expunge, extirpate, get rid of, leave out,
modify by excisions, obliterate, omit, remove,
rub out, rule out, scratch out, strike off, take
out, weed, wipe out.”
Likewise the expression “omit” is also defined
by this Thesaurus as follows:-
“Omit: - Abstain from inserting, bupass,
cast aside, count out, cut out, delete, discard,
dodge, drop, exclude, fail to do, fail to include,
fail to insert, fail to mention, leave out, leave
undone, let go, let pass, let slip, miss, neglect,
omittere, pass over, praetermittere, skp,
slight, transpire.”
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And the expression “repeal” is defined as
follows:
“ Repeal: - Abolish, abrogare,
abrogate, annul, avoid, cancel, countermand,
declare null and void, delete, eliminate,
formally withdraw, invalidate, make void,
negate, nullify, obliterate, officially withdraw,
override, overrule, quash, recall, render
invalid, rescind, rescindere, retract, reverse,
revoke, set aside, vacate, void, withdraw.”
“13. On a conjoint reading of the three
expressions “delete”, “omit”, and “repeal”, it
becomes clear that “delete” and “omit” are
used interchangeably, so that when the
expression “repeal” refers to “delete” it
would necessarily take within its ken an
omission as well. This being the case, we
do not find any substance in the
argument that a “repeal” amounts to an
obliteration from the very beginning,
whereas an “omission” is only in futuro.
If the expression “delete” would amount to a
“repeal”, which the appellant’s counsel does
not deny, it is clear that a conjoint reading of
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Halsbury’s Laws of England and the Legal
Thesaurus cited hereinabove both lead to the
same result, namely, that an “omission” being
tantamount to a “deletion”’’ is a form of
repeal.”
21. It is settled law that Parliament is
presumed to know the law when it enacts a
particular piece of legislation. The Prevention
of Corruption Act was passed in the year
1988, that is long after 1969 when the
Constitution Bench decision in Rayala Corpn.
had been delivered. It is, therefore, presumed
that Parliament enacted Section 31 knowing
that the decision in Rayala Corpn. had stated
that an omission would not amount to a repeal
and it is for this reason that Section 31 was
enacted. This again does not take us further
as this statement of the law in Rayala
Corpn. is no longer the law declared by
the Supreme Court after the decision in
Fibre Board case.
23. Fibre Board case is a recent
judgment which, as has correctly been argued
by Shri Radhakrishnan, learned Senior
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Counsel on behalf of the Revenue, clarifies the
law in holding that an omission would amount
to a repeal. The converse view of the law has
led to an omitted provision being treated as if
it never existed, as Section 6 of the General
Clauses Act would not then apply to allow the
previous operation of the provision so omitted
or anything duly done or suffered thereunder.
Nor may a legal proceeding in respect of any
right or liability be instituted, continued or
enforced in respect of rights, and liabilities
acquired or incurred under the enactment so
omitted. In the vast majority of cases, this
would cause great public mischief, and
the decision of Fibre Board case is
therefore clearly delivered by this Court
for the public good, being, at the very
least a reasonably possible view. Also, no
aspect of the question at hand has remained
unnoticed. For this reason also we decline to
accept Shri Aggarwal’s persuasive plea to
reconsider the judgment in Fibre Board case.
This being the case, it is clear that on point one
the present appeal would have to be
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dismissed as being concluded by the decision
in Fibre Board case.
17. The learned counsel for the Respondents-
Excise Department, Mr. N. Suresh has also brought to
the notice of the Court that the Constitutional validity of
the aforesaid Rule-14(2) of the 1968 Excise Rules was
examined by the Division Bench of this Court in the
case of State of Karnataka & Ors. Vs. Hotel
Bangalore International Ltd., (ILR 2005 KAR 1397)
and the same was upheld with the following
observations:-
“7. Keeping in view the law governing
the field and the dictum of the Apex Court, the
controversy in the present case is to be
examined. The respondents are CL-2 and Cl-9
licencees. These categories of licencees come
in contact with public at large and offer liquor
for sale. It is found that over the years, these
licencees transacted a meagre business
which is insufficient even to meet the
prescribed licence fee. This clearly indicates
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that there was purchase and sale of liquor
clandestinely leading to evasion of huge
amounts of excise duty. With an object to
plug these loopholes and in the interest
of State revenue and public interest, the
excise Department collected details from
various Districts and after thorough
examination, notified the draft Rules on
21.6.2002, proposing to amend the Rules by
insertion of Sub-rule (2) Rule 14, 14A and 14B
of the Rules.
12. It is now well settled that Article 14
does not forbid reasonable clarification for the
purpose of legislation. In the present case,
among the various categories of licencees, it is
CL-2 and CL-9 licencees who come into
contact with public at large and offer liquor
for sale. According to the information collected
by the State, the business transacted by
these categories of licencees is so meagre and
insufficient even to meet the prescribed
licence fee. This clearly indicates that there
was purchase and sale of liquor clandestinely
leading to evasion of huge amounts of excise
duty. In order to plug these loopholes and
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in the interest of revenue, the State
under the impugned notification referred
only CL-2 and CL-9 licencees and
excluded the other categories of
licencees. This classification by the State
can neither be said to be arbitrary nor
discriminatory. To achieve the object which
is expedient, the State in its wisdom included
the CL-2 and CL-9 licencees in the impugned
notification. It is clear that the differentiation
has a rational relation to the object sought to
be achieved by the impugned notification.
Therefore, the contention of respondents that
the impugned notification is violative of Article
14 of the Constitution is liable to be rejected”.
18. It may be noted here that the question of vires
of the said Rule 14(2) of the Excise Rules of 1968 is not
even under challenge again before this Court in this
case, but the only question is, whether it’s “omission” or
“repeal” with effect from 01.08.2014 divests the Excise
Authorities to invoke the said Rule and demand the
penalty/damages for short lifting of the liquor from the
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State Board Corporation for the period when the said
Rule-14(2) on the Statute Book, between 01/04/2003
to 01/08/2014.
19. The learned Senior counsel for the petitioner
Mr.K.P.Kumar upon the aforesaid later judgments in the
case of Fibre Boards Pvt.Ltd., (supra) and Sri.
Bhagavathi Steel Rolling Mills (supra) brought to his
notice, submitted that even though the omission of the
Rule may be treated as ‘repeal’ though in earlier cases
in the cases of M/s.Rayala Corporation Pvt. Ltd., and
Kolhapur Canesugar Works Ltd., it was held to be not
amounting to repeal, still, the repeal of a Rule is not
saved by applying Section 6 of the General Clauses Act,
1897, and the decisions of the Constitution Bench of
Supreme Court in Rayala Corporation and Kolhapur
Canesugar Works would still hold the field and govern
the present case.
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20. The said contention is fallacious and not
sustainable for the following reasons:-
Firstly, the repeal or omission in the case of
Rayala Corporation and Kolhapur Canesugar Works
Ltd. were also repeal of Rules only. Rule 132-A of the
Defence of India Rules, 1962, relating to prosecution
was omitted and Rule 10 and 10-A in the Central Excise
Rules relating to recovery of excess refund or rebate was
omitted in the case of Kolhapur Canesugar case. The
decision of the Constitution Bench with regard to such
‘omission’ not amounting to ‘repeal’ has been held to be
per incuriam or only obiter dicta in the later decisions in
the case of Fibre Boards (2015) and Bhagawathi
Steels (2016) and it has been categorically held that
such omission of enactment would also amount to
‘repeal’ and Section 6 of the General Clauses Act would
apply and save the action taken under the repealed
provision, as discussed above.
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Secondly, levying of penalty/damages under Rule
14(2) of the State Excise Rules, 1968 in question, as
contended by Mr.K.P.Kumar himself is that the said
Rule is a charging provision and except the said Rule,
there was no other provision for imposing the said
penalty/damages for short lifting of liquor quantity. If it
is a charging provision, as it appears to be, there is no
reason to treat the ‘Rule’ 14(2) as anything different
from a ‘Section’ or ‘enactment’ or a ‘provision’ covered
by the scope of Section 6 of the General Clauses Act,
1897. It may also be noticed that in 1897, when India
was not independent and no ‘Rules’ under delegated
powers to the State Government were framed at that
time therefore absence of word ‘Rule’ in Section 6 of the
General Clauses Act, 1897 in the context of situation
then obtaining should not allow the levy of
Penalty/damages under Rule like Rule 14 (2) of present
Excise Rules to lapse by holding that Section 6 of the
General Clauses Act does not apply to Rules. It is only
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after the State Re-organization Act, 1956 that States in
India started enacting such Rules under their delegated
powers under the relevant Acts.
Merely because it is a ‘Rule’ enacted by the State
Legislature under the delegated powers under Section
71 of the Karnataka State Excise Act, 1965, it does not
lose the legislative sanction and sustainability as a
charging provision and its omission or repeal cannot
deprive the Respondents-Excise Department to invoke
and apply this provision by virtue of Section 6 of the
General Clauses Act for demanding the
penalty/damages for the short lifting of the liquor, for
the period during which the said Rule 14 (2) existed on
the Statute Book. The same will be clearly saved by
virtue of Section 6 of the General Clauses Act, 1897
enacted much prior to independence of India even
though the word ‘Rule’ is not separately mentioned in
Section 6 of the Act. The Mysore General Clauses Act,
1899 includes ‘Rules’ within the definition of
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‘Enactment’. Therefore, despite some legislative gap for
applying a saving clause to a charging provision, it
cannot be allowed to fail, more so when the liability to
pay pertains to a period when the said charging
provision was very much on the Statute Book.
21. Therefore, this contention of the learned
Senior counsel for the petitioner is held to be devoid of
merit and the action of the Respondents-Excise
Department for demand of such penalty/damages for
compensating the loss of revenue caused to the State by
such short lifting of liquor quantity cannot be held to be
without jurisdiction or illegal.
22. It would be appropriate here to consider the
judgment of the Hon’ble Supreme Court in the case of
M/s. Guljag Industries Vs. Commercial Tax Officer and others
[(2007 9 VST 1 (SC)] wherein the Hon’ble Supreme Court
dealing with the case of levy of Penalty from the
Consignors or Consignee or even Transporters for not
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carrying on Declaration Form prescribed under the
provisions of Section 78(2) of the Rajasthan Sales Tax
Act for regulating the checking of the Transit movement
of goods for sale. Paragraph 22 of the said judgment
reads as hereunder:
22. There is dichotomy between
contravention of section 78(2) of the said
Act which invites strict civil liability on
the assessee and the evasion of tax.
When a statement of import/export is not filed
before the A.O. it results in evasion of tax,
however, when the goods in movement are
carried without the declaration form
No.18A/18C then strict liability comes in, in
the form of Section 78(5) of the said Act.
Breach of section 78(2) imposes strict
liability under section 78(5) because as
stated above goods in movement cannot be
carried without form No.18A/18C. We are not
concerned with non-filing of statements before
the A.O. We are concerned with the goods in
movement being carried without supporting
declaration forms. The object behind
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enactment of Section 78(5) which gives
no discretion to the competent authority
in the matter of quantum of penalty
fixed at 30 per cent of the estimated
value is to provide to the State a remedy
for the loss of revenue. The object behind
enactment of section 78(5) is to emphasise
loss of revenue and to provide a remedy
for such loss. It is not the object of the
said section to punish the offender for
having committed an economic offence and to
deter him from committing such offences. The
penalty imposed under the said Section
78(5) is a civil liability. Willful consignment
is not an essential ingredient for attracting
the civil liability as in the case of prosecution.
Section 78(2) is a mandatory provision. If
the declaration form 18A/18C does not
support the goods in movement because it is
left blank then in that event section 78(5)
provides for imposition of monetary penalty
for non-compliance. Default or failure to
comply with section 78(2) is the
failure/default of statutory civil obligation
and proceedings under section 78(5) are
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neither criminal nor quasi-criminal in
nature. The penalty is for statutory
offence. Therefore, there is no question of
proving of intention or of mens rea as the
same is excluded from the category of
essential element for imposing penalty.
Penalty under section 78(5) is attracted as
soon as there is contravention of statutory
obligations. Intention of parties
committing such violation is wholly
irrelevant. Moreover, in the present case, we
find that goods in movement carried with form
No.18A/18C. The modus operandi adopted
by the assessees itself indicates mens rea.
This is not the case where goods in movement
are carried without the declaration forms. In
the present matter, as stated above, goods in
movement were carried with the declaration
forms. These forms were duly signed,
however, material particulars were not filled
in. The explanation given by the assessees in
most of the cases is that they are not
responsible for the misdeeds of the
consignors. The other explanation given by
the assessees is regarding the language
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problem. There is no merit in these defences.
They are excuses. The declaration forms were
unfilled so that they could be used again and
again. The forms were collected by the
consignee from the said Department. The
consignee undertakes to see that the value of
the goods is supplied by the consignor. It is
not open to the consignee to keep the column
in respect of the description of goods as
blank. Even the column dealing with nature of
transaction is left blank. The consignee is the
buyer of the goods. He knows the
descriptions of the goods which he is
supposed to buy. There is no reason for
leaving that column blank. Therefore, there
are no special circumstances in any case for
waiver of penalty for contravention of section
78(2). The assessees were fully aware that
the goods in movement had to be supported
by form ST 18A/18C. Therefore, they made
the goods travel with the forms. However, the
said forms are left blank in all material
respects. Therefore, A.O. was right in drawing
inference of mens rea against the assessees.
It has been repeatedly argued before us that
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apart from the declaration forms the
assessees possessed documentary evidence
like invoice, books of accounts, etc., to support
the movement of goods and, therefore, it was
open to the assessees to show to the
competent authority that there was no
intention to evade the tax. We find no merit in
this argument. Firstly, we are concerned with
contravention of section 78(2) which requires
the goods in movement to travel with the
declaration in form 18A/18C duly filled in. It
is section 78(2)(a) which has been
contravened in the present case by the
assessees by carrying the goods with blank
forms though signed by the consignee. In fact,
the assessees resorted to the above modus
operandi to hoodwink the competent officer at
the check-post. As stated above, if the form is
left incomplete and if the description of the
goods is not given then it is impossible for the
assessing officer to assess the taxable goods.
Moreover, in the absence of value/price it is
not possible for the A.O. to arrive at the
taxable turnover as defined under section
2(42) of the said Act. Therefore, we have
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emphasized the words "material particulars"
in the present case. It is not open to the
assessees to contend that in certain cases of
inter-State transactions they were not liable
in any event for being taxed under the RST
Act, 1994 and, therefore, penalty for
contravention of section 78(2) cannot be
imposed. As stated hereinabove, declaration
has to be given in form 18A/18C even in
respect of goods in movement under inter-
State sales. It is for contravention of section
78(2) that penalty is attracted under section
78(5). Whether the goods are put in movement
under local sales, imports, exports or inter-
State transactions, they are goods in
movement, therefore, they have to be
supported by the requisite declaration. It is
not open to the assessee to contravene
and say that the goods were exempt.
Without disclosing the nature of transaction it
cannot be said that the transaction was
exempt. In the present case, we are only
concerned with the goods in movement not
being supported by the requisite declaration.
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23. This judgment really covers the controversy
involved in the present case under Rule 14(2) of the
Excise Rules of 1968.
24. The premise of Rule 14 (2) for recovering ‘Loss
of Revenue” to State caused by short lifting of liquor
quantity, is in corollary to ‘Penalty’ recovered under
Rule 21 (5) of MMDR (Mine & Mineral Development
Regulations), wherein a recent decision rendered by
Hon’ble Supreme Court only on 2nd August 2017,
relying upon its previous decision in the case of
Karnataka Rare Earth case (2004) 2 SCC 283 held
that such compensation to State should be fully
recovered even if illegal mining of ore, was done on any
land, even if not covered by mining lease or Mining Plan.
This judgment is on all fours to the present case. The
relevant extract from the said judgment in Common
Cause Vs. Govt. of India and others (Writ Petition
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(Civil) No.114/2014, decided on 2nd August 2017, is
quoted below for ready reference:
“148. On behalf of the State of Odisha, it
was submitted by Shri Rakesh Dwivedi
learned senior counsel by relying upon
Karnataka Rare Earth v. Senior Geologist,
Department of Mines & Geology that what is
sought to be achieved by Section 21(5) of
the MMDR Act is to recover the price of
the mineral that has been illegally or
unlawfully or unauthorisedly raised with
an intention to compensate the State for
the loss of the mineral owned by it, the
loss having been caused by a person who is
not authorized by law to raise that mineral.
There is no element of penalty involved
in this and the recovery of the mineral or
its price is not a penal action but is
merely compensatory. This is what this
Court had to say in Karnataka Rare Earth:
“12. Is the sub-section (5)
of Section 21 a penal enactment? Can
the demand of mineral or its price
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thereunder be called a penal action
or levy of penalty?
13. A penal statute or penal law
is a law that defines an offence and
prescribes its corresponding fine,
penalty or punishment. (Black’s Law
Dictionary, 7th Edn., p.1421). Penalty is
a liability composed (sic imposed) as a
punishment on the party committing
the breach. The very use of the term
“penal” is suggestive of punishment
and may also include any
extraordinary liability to which the law
subjects a wrong-doer in favour of the
person wronged, not limited to the
damages suffered. (See Aiyar P.
Ramanatha: The Law Lexicon, 2nd
Edn., p.1431).
14. In support of the submission
that the demand for the price of mineral
raised and exported is in the nature of
penalty, the learned counsel for the
appellants has relied on the marginal
note of Section 21. According to
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Justice Singh, G.P.: Principles of
Statutory Interpretation (8th Edn.,
2001, at p.147) though the opinion is
not uniform but the weight of authority
is in favour of the view that the
marginal note appended to a section
cannot be used for construing the
section. There is no justification for
restricting the section by the marginal
note nor does the marginal note control
the meaning of the body of the section
if the language employed therein is
clear and spells out its own meaning.
In Director of Public Prosecutions v.
Schildkamp, Lord Reid opined that a
sidenote is a poor guide to the scope of
a section for it can do no more than
indicate the main subject with which
the section deals and Lord Upjohn
opined that a sidenote being a brief
precis of the section forms a most
unsure guide to the construction of the
enacting section and very rarely it
might throw some light on the
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intentions of Parliament just as a
punctuation mark.
15. We are clearly of the opinion
that the marginal note “penalties”
cannot be pressed into service for
giving such colour to the meaning of
sub-Section (5) as it cannot have in
law. The recovery of price of the
mineral is intended to compensate
the State for the loss of the mineral
owned by it and caused by a person
who has been held to be not entitled in
law to raise the same. There is no
element of penalty involved and the
recovery of price is not a penal
action. It is just compensatory.”
149. We are in agreement with the view
expressed by learned Attorney General and
Shri Dwivedi as also the view expressed in
Karnataka Rare Earth. The decision in
Khemka & Co. is not at all apposite. There is
no ambiguity in Section 21(5) of the MMDR
Act or in its application. We are also of
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opinion that though Section 21(1) of MMDR
Act might be in the realm of criminal
liability, Section 21(5) of the MMDR Act is
certainly not within that realm.
150. In our opinion, Section 21(5) of the
MMDR Act is applicable when any person
raises, without any lawful authority, any
mineral from any land. In that event, the
State Government is entitled to recover
from such person the mineral so raised
or where the mineral has already been
disposed of, the price thereof as
compensation. The words ‘any land’ are
not confined to the mining lease area. As far
as the mining lease area is concerned,
extraction of a mineral over and above what
is permissible under the mining plan or under
the EC undoubtedly attracts the
provisions of Section 21(5) of the MMDR
Act being extraction without lawful
authority. It would also attract Section
21(1) of the MMDR Act. In any event,
Section 21(5) of the Act is certainly attracted
and is not limited to a violation committed by
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a person only outside the mining lease area –
it includes a violation committed even within
the mining lease area. This is also because
the MMDR Act is intended, among other
things, to penalize illegal or unlawful mining
on any land including mining lease land and
also preserve and protect the environment.
Action under the EPA or the MCR could be
the primary action required to be taken
with reference to the MCR and Rule 2(ii a)
thereof read with the Explanation but that
cannot preclude compensation to the State
under Section 21(5) of the MMDR Act. The
MCR cannot be read to govern the MMDR
Act.
151. What is the significance of this
discussion? It was submitted that the CEC
has taken the following view:
“ ….. it may be appropriate
that 30% of the notional value of the iron and
manganese produced by each of the lessees
without/in excess of the environmental
clearances may be directed to be recovered
from the concerned lessees and with the
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explicit understanding the concerned lessees
as well as the officers will continue to be
liable for action under the provisions of the
respective Acts.”
152. Learned counsel for the petitioners
and the learned Amicus were of opinion that
the provisions of Section 21(5) of MMDR Act
requires that the entire price of the illegally
mined ore should be recovered from each
defaulting lessee. Similarly, in its affidavit,
the Union of India differs with the
recommendation of the CEC. According to the
affidavit of the Union of India this would be
contrary to the statutory scheme and in fact
100% recovery should be made under the
provisions of Section 21(5) of the MMDR. We
may note that only to this extent, the learned
Attorney General differed with the view
expressed by the Union of India and
submitted that the recommendation of the
CEC to recover only 30% of the value of the
illegally mined ore should be accepted.
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153. In our opinion, there can be no
compromise on the quantum of
compensation that should be recovered
from any defaulting lessee – it should be
100%. If there has been illegal mining, the
defaulting lessee must bear the consequences
of the illegality and not be benefited by
pocketing 70% of the illegally mined ore. It
simply does not stand to reason why the
State should be compelled to forego what
is its due from the exploitation of a
natural resource and on the contrary be a
party in filing the coffers of defaulting lessees
in an ill gotten manner.
25. Thus while full compensation to State is
realizable for illegal mining in areas other than the one
covered by Mining Lease to full extent, besides criminal
liability under Rule 21(1) of MMDR, as held by Hon’ble
Apex Court, there is no reason, why a similar
compensation for not lifting the prescribed quantity of
liquor for the given period should not be recovered,
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besides a consequence of cancellation of licence itself.
Thus, the latest judgment of Hon’ble Apex Court
completely clinches the issue in favour of State in the
present case as well.
26. From the above, it is clear that the reliance
placed by the learned Senior Counsel for the petitioners
on the earlier Constitution Bench decisions in the case
of M/s. Rayala Corporation (P) Ltd. (supra) and
Kolhapur Casesugar Works Limited (supra) is of little
assistance to the case of the petitioners before this
Court and the action taken against these petitioners
with regard to Rule 14 (2) of the Excise Rules for a
period prior to its omission on 01/08/2014 is justified
and the said demand of Penalty/fiscal liability cannot be
struck down on the basis of the aforesaid contention
raised on behalf of the petitioners.
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27. This Court is further of the view that the
said fiscal liability in the name of Penalty under Rule 14
(2) of the Excise Rules of 1968 is actually the price or
the liquidated damages to be paid by the Excise
Licencees or vendors of liquor for the breach of contract
on their part for short-lifting of the prescribed quantity
of liquor from the State Beverage Corporation. That is
why there is no need to go into the question of mens rea
or opportunity of hearing or raising an objection in that
regard was considered appropriate in the aforesaid case
in Lakshmi Bar and Restaurant case (supra), decided
by this Court on 27/06/2017 and the requirement of
giving such opportunity wherein Rule 14(2) was
restricted in the case where the licence itself was sought
to be cancelled for the said reason of short-lifting of the
liquor.
28. This Court also does not find any merit in the
contention No.III that measure of Penalty under Rule 14
(2) cannot be assailed on different price range for
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different types of liquor. It is for the Legislature to
adopt such measure and no illegality or arbitrariness is
seen in such a measure adopted in Rule 14(2) in the
present case.
29. This Court has also noticed that in none of
the cases, the petitioners have even raised any such
objections or reasons for such short lifting of liquor.
Had it been so raised, the authority concerned of the
Excise Department could have been expected to pass
appropriate orders in this regard. Having not done that,
the petitioners cannot be permitted to raise the said
plea of alleged breach of principles of natural justice to
get the demand notices quashed on the said ground.
30. Having said as above, this Court is of the view
that while upholding the levy, about its mathematical
computation and assessment, the petitioners can be
given even now an opportunity of hearing. Therefore,
the Respondent authorities are directed to pass
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speaking adjudication orders, in cases where Objections
are now filed about the quantum of penalty and
damages under Rule 14 (2) of the Excise Rules of 1968,
within a period of one month from today. However, no
objection as to the very levy shall be entertained by
them. The petitioners are permitted to file such
Objections within one month from today and thereafter
a period of two months is allowed to the respective
authorities to pass such orders thereon. No extension
of time would be permitted to any of the parties in this
regard.
31. Petitions are accordingly disposed of with
aforesaid observations. No order as to costs.
Sd/- JUDGE
BMV*/Srl
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