JUDGMENT : ( 1. ) THE petitioner took an excise contract for sale of country liquor for a consideration of Rs. 4,81,000 in an auction for the year 1978-79. Under the terms of the licence granted to the petitioner it was required to lift 548 proof litres of Mesala liquor and 1608 proof litres of plain liquor in each quarter from the warehouse. The petitioner committed breach of this condition. Consequently the Collector imposed penalty amounting to Rs. 15,452 which is being recovered from the petitioner as arrears of land revenue. By this petition under Article 226 of the Constitution, the petitioner challenges the said demand. ( 2. ) SECTION 17 of the M. P. Excise Act, 1915 provides that no intoxicant shall be sold except under the authority and subject to the terms and conditions of licence granted in that behalf. Section 18 enables the State Government to lease to any person amongst others the right of selling by wholesale or by retail any liquor, intoxicating drug within any specified area. Section 27 empowers the State Government to accept payment of a sum in consideration of the grant of any lease under section 18. It is under these provisions that excise contracts for sale of liquor are auctioned by the Government. The person in whose favour the contract or lease is granted is given a licence under section 18 (2 ). In addition to the consideration payable under section 27, the Government realises duty under section 25. This section empowers the State Government to levy an excise duty or a countervailing duty on all excisable articles imported or exported or transported or manufactured, cultivated or collected under any licence or manufactured in any distillery established or any distillery or brewery licensed under the Act. Section 26 provides the mode of levying such duty. One of the modes of collecting duty on liquor is at the stage of issue from a warehouse. Subsection (1) of section 62 authorises the State Government to make rules for the purpose of carrying out the provisions of the Act. Clause (h) of subsection (2) of this section in particular enables the Government to make rules prescribing the authority by which and the form in which and the terms and conditions on and subject to which any licence, permit or pass shall be granted. Clause (h) of subsection (2) of this section in particular enables the Government to make rules prescribing the authority by which and the form in which and the terms and conditions on and subject to which any licence, permit or pass shall be granted. This clause reads as follows: " (h) prescribing the authority by, the form in which, and the terms and conditions on and subject to which any licence, permit or pass shall be granted, and may by such rules, among other matters,- (i) fix the period for which any licence, permit or pass shall continue in force, (ii) prescribe the scale of fees or the manner of fixing the fees payable in respect of any such licence permit or pass, (iii) prescribe the amount of security to be deposited by holders of any licence. permit or pass for the performance of the conditions of the same, (iv) prescribe the accounts to be maintained and the returns to be submitted by licence-holders, and (v) prohibit or regulate the partnership in, or the transfer of, licences;" ( 3. ) BY the rules made in 3960 under section 62 of the Act, the State government prescribed conditions to be inserted in the licences. Condition no. 2-C was then as follows: "the minimum quantity for taking issues from the warehouse for sale is fixed at. . . . . . . . . . . . litres spiced spirit and. . . . . . . . . . . . litres plain spirit. You shall be liable to make good every month the deficit of monthly average of the total minimum duty on or before the 10th day of each month following the month to which the deficit duty relates. " The validity of condition No. 2-C in the above shape came to be considered by the Supreme Court in Bimalchandra v. State of M. P. (1971 M PL J 168 ). It was held that sections 25 and 26 of the Excise Act did not authorise the State Government to charge any duty on the liquor which was not issued to the licensee and the condition was held to be invalid. It was held that sections 25 and 26 of the Excise Act did not authorise the State Government to charge any duty on the liquor which was not issued to the licensee and the condition was held to be invalid. Condition No. 2-C as prescribed by the rules was then amended and provision was made in it for payment of pratikar at the rate fixed by the Government to the extent to which the liquor obtained by the licensee was less than the fixed monthly minimum quantity. The rate of pratikar fixed by the Government was the rate of duty payable on the liquor on its issue. The validity of condition No. 2-C as so amended was challenged in Gappulal v. State of M. P. (1971 M PL J 547 ). It was held that as the pratikar which the Government sought to realise was nothing but the duty, the condition was invalid. This view was upheld in appeal by the Supreme Court in State of M. P. v. Firm Gappulal (AIR 1976 S C 633 ). Condition no. 2-C was further amended and provision was made in it for payment of compensation in case the licensee failed to lift the minimum quantity of liquor as agreed to by him. The validity of this condition was upheld in suresh Chandra v. State of M. P. and others (M. P. No. 579 of 1970, decided on Nth April 1972) and State v. Sunder Lal (1976 M P L J 254-A I R 1976 M P 175 ). In suresh Chandras case, however, the compensation which the Government claimed from the licensee was nothing but the duty payable on the unlifted liquor and it was held that such a claim could not be allowed because it was in substance a claim for duty and not for compensation. Condition No. 2-C was then again amended and conditions Nos. 11 and 12 were added by notifications issued in 1975-76. The effect of these amendments is that if the licensee does not lift the minimum quantity of liquor, the Collector can impose penalty at a rate not exceeding Rs. 20 per proof litre for every litre of spirit lifted short of the minimum quantity. 11 and 12 were added by notifications issued in 1975-76. The effect of these amendments is that if the licensee does not lift the minimum quantity of liquor, the Collector can impose penalty at a rate not exceeding Rs. 20 per proof litre for every litre of spirit lifted short of the minimum quantity. The conditions so amended and which were inserted in the licence issued to the petitioner read as under: "2-C. The minimum quantity for taking issues from the warehouse for sale is fixed as follows:-Minimum quantity in proof litres. Annual Monthly spiced Spirit (to be filled in by the administra-Plain Spirit tive department)11. The Collector may impose penalty at a rate not exceeding rupees 20 per proof litre for every litre of spirit lifted short of the quantity specified in the conditions No. 2-C above subject to such general or special directions as may be issued by the Excise Commissioner. 12. On the expiry of this licence if the minimum quantity of country spirit for taking issues from warehouse for sale is exceeded, the Collector may on an application from the licensee within three months from the close of the period of licence may remit, wholly or in part, the amount of penalty imposed under condition No. 11 above. " ( 4. ) IT is first contended by the learned counsel for the petitioner that conditions Nos. 2-C and 11 and 12 as prescribed by rules are invalid and void because the Government has no power to prescribe such conditions. In our opinion, there is no merit whatsoever in this argument. We have already quoted section 62 (2) (h) which empowers the Government to prescribe the terms and conditions on and subject to which any licence may be granted. It is true that in clause (h) of section 62 (2) five matters are specifically enumerated but the enumeration of these matters does not take away the general power conferred on the Government to prescribe the terms and conditions not covered by these five enumerated matters. The words "among other matters" which precede the enumeration of five matters in clause (h) clearly postulate that the enumeration is not exhaustive and the general power of prescribing terms and conditions is not taken away. This was the view taken by the Division Bench of this Court in Suresh Chandras case (supra) and we respectfully agree with it. ( 5. This was the view taken by the Division Bench of this Court in Suresh Chandras case (supra) and we respectfully agree with it. ( 5. ) IT was next contended that the power to impose penalty conferred by condition No. 11 on the Collector is nothing but another mode of realising the duty. This contention is also not worth acceptance. Condition No. 11 fixes the maximum penalty which the Collector may impose. The condition does not make it obligatory on the Collector to impose penalty in every case or to impose maximum penalty whenever he decides to impose penalty. The condition leaves it open to the Collector to decide having regard to the facts and circumstances of each case whether it is a fit case for imposition of penalty and if so as to what penalty should be imposed. Condition No. 11 provides a statutory deterrent for requiring the licensee to comply with the obligation to lift the minimum quantity of liquor mentioned in the licence. ( 6. ) IT was also contended that the aforesaid conditions requiring the licensee to lift minimum quantity of liquor from the warehouse is against the directive principles of state policy and also against public policy. This contention also cannot be accepted. We are here dealing not with purely contractual terms but with conditions laid down by statutory rules. Non-observance of directive principles does not make a statute or statutory rule invalid. Similarly a statutory rule cannot be tested on the touchstone of public policy. This contention raised before us was also advanced in suresh Chandras case (supra) and was rejected. We can only draw the attention of the Government to the observations of Krishna Iyer, J. in p. S. Kaushal v. Union of India (AIR 1980 S C 1457 at p. 1476 ). May we hopefully expect the State to bear true faith and allegiance to that constitutional orphan, Article 47?" ( 7. ) IT was then contended that the Collector in the instant case has imposed penalty without following the principles of natural justice and that the amount of penalty imposed by him is nothing but the amount of duty payable on the quantity of liquor which was not lifted by the petitioner. We have already-seen that conditions Nos. 2-C, 11 and 12 in the licence have their origin in the rules framed under section 62 (2) (h) of the Act. We have already-seen that conditions Nos. 2-C, 11 and 12 in the licence have their origin in the rules framed under section 62 (2) (h) of the Act. We have also expressed that condition No. 11 does not oblige the Collector to impose penalty in every case even if there be a breach committed by the licensee in lifting the minimum quantity of liquor as mentioned in condition No. 2-C. It is well settled that whenever a statute or statutory rule provides for imposition of penalty it is not obligatory on the authority concerned to impose penalty in every case even though a minimum penalty be prescribed [see Hindustan Steel Ltd. v. State of Orissa ( AIR 1970 S C 253) and Universal Cables Ltd v. Union of India (1977 M P L J 394)] The power to impose penalty is a quasi judicial power and the collector must exercise this power after complying with the rules of natural justice, i. e. after noticing the licensee as to why penalty should not be imposed. After a notice is received, the licensee can show that he committed no breach of condition No. 2-C or that the breach was technical or trivial or that the circumstances were such which made it impossible for him to comply with the conditions. The licensee can also show that even if a case for imposition of penalty is made out, he should not be visited with a heavy penalty and that the circumstances are such that only a nominal penalty should be imposed. In the instant case, notice was issued to the licensee after expiry of the first and second quaiters of the licence. The licensee showed cause and also gave some assurance that the total minimum quantity of liquor would be lifted by the end of the year. No action was taken for imposition of penalty at that stage by the Collector. After expiry of the licence, the Collector imposed penalty by his order dated 29th April 1979 without giving any notice to the licensee. In our opinion, before imposing the penalty after the expiry of the licence, the Collector should have again noticed the licensee for showing cause as to why penalty should not be imposed. The notice issued after the expiry of first and second quarters was not enough as no action was taken on this notice. In our opinion, before imposing the penalty after the expiry of the licence, the Collector should have again noticed the licensee for showing cause as to why penalty should not be imposed. The notice issued after the expiry of first and second quarters was not enough as no action was taken on this notice. Omission to issue notice before passing the order imposing penalty is one serious infirmity in the order of the Collector. The second point to be noticed is that the collector imposed penalty at the rate of Rs. 10 per proof litre in respect of plain liquor and Rs. 14 per proof litre in respect of Masala liquor to the extent to which the liquor obtained by the licensee was less than the minimum quantity. The rates of penalty applied by the Collector are the same as rates of duty for these liquors. Indeed, this fact is clearly stated by the collector in this order. Thus the provision for imposition of penalty was used for realisation of duty on liquor not taken by the licensee. In other words, the penalty provision was made a cloak for realising the duty which could not be realised on unlifted liquor as held by the Supreme Court in gappulals case. The ratio of the decision of Suresh Chandras case thus becomes applicable and the imposition of penalty has to be held to be invalid. It is true that the Collector can fix the rate of penalty upto Rs. 20 per proof litre, but the penalty has to be fixed having regard to the facts and circumstances of the case and the power to impose penalty cannot be made a cloak or device for realising the duty which has been held to be invalid in Gappu-lals case. It was argued by the learned Government Advocate that the penalty was imposed according to the general directions of the Excise Commissioner which the Collector was bound to follow. In support of this argument our attention was drawn to the words "subject to such general or special directions as may be issued by the Excise Commissioner" as they occur towards the end of condition No. 11. These words have to be read in the back ground that condition No. 11 confers on the Collector quasi judicial power which cannot be controlled by outside agency. These words have to be read in the back ground that condition No. 11 confers on the Collector quasi judicial power which cannot be controlled by outside agency. Having regard to the context of condition No. 11 the words in question can only mean that the Excise Commissioner can issue general or special directions for guidance of the Collector and not to control or limit the discretion conferred on him. Any general direction issued by the Excise Commissioner cannot, therefore, support an order of the Collector which is not otherwise supportable under condition No. 11. ( 8. ) THE petition is allowed. The order of the Collector imposing penalty (Annexure R-III) is quashed. The demand notice (Annexure V) is also quashed. There will be. no order as to costs. Petition allowed.