Sharfuddin v. State of Bihar — 1984 DIGILAW 149 (PAT)

By Court The main question arising in this case is whether the fee payable on the licence for sale of spirit can be fixed under the Excise Law of Bihar by holding public auction. 2. The petitioners in C.W.J.C. 876/84 were licensees of Country Liquor shops and those in C.W.J.C. 938/84 licensees for sale of foreign liquor and have by this application challenged the decision to settle the shops for the financial year 1984-85 by holding public auctions. These writ petitions and a large number of other similar applications (three of them being in relation to licences for sale of foreign liquor) were filed in February, 1984. The petitioners prayed for an interim order staying the proposed auctions pending admission of the cases. The prayer was refused with an observation that any step taken during the pendency of the cases would be subject to the result of the applications The cases were placed for admission on dates convenient to both sides. The main argument on behalf of the petitioners was addressed by Mr. Sidhartha Shanker Ray in the present case (C.W.J.C. 876) which was treated as the leading case. The learned counsels in other cases generally, adopted the argument, but some of them made supplementary arguments. The cases were heard at considerable length. Although we are dismissing the applications at the admission stage, but in the circumstances in which they have been heard, we are briefly indicating the reasons in support of our view. 3. The petitioners in the present cases and in the other cases were running spirit shops in different pares of the State under licences which expired on 31.3.1984. They claimed that they were entitled to resettlement for the present year also. 4. According to the case of the respondents, as disclosed in the counter affidavits, the settlement for the year 1984-85 in favour of the petitioners and other earlier licensees would bring about Rs. 1,26,00,000/- (l crore 26 lacs) as fee while the amount is likely to exceed Rs. 10,00,00,000/- (10 crores) on public auctions. Only 60 percent of the shops have so far been settled and that too for a period of six months only and a Sum of Rs. 4.08 (crores has already been realised. The respondents assert that it is desirable to determine the fees through auctions, as the prospect of realising higher revenue is not an illegal consideration. 5. Only 60 percent of the shops have so far been settled and that too for a period of six months only and a Sum of Rs. 4.08 (crores has already been realised. The respondents assert that it is desirable to determine the fees through auctions, as the prospect of realising higher revenue is not an illegal consideration. 5. It has been contended by Mr. Ray that the Bihar and Orissa Excise Act, 1915 (hereinafter referred to as 'the Act') does not contemplate settlement of spirit shops through process of public auctions and the Rule 100 of the Rules framed by the Board of Revenue under section 90 of the Act, providing for holding auctions is ultra vires, He also challenged the validity of sections 38 and 90(7). The subject-matter of Chapter VI of the Act, containing sections 30 to 45 deals with licences, permits and passes. Sections 30 to 35 and 38 have been dealt with by the learned counsel for both sides in some detail and, according to Mr. Ray, the sections 30 to 35 have laid down an exhaustive code in this regard. Mr. Ray contended that the scheme of this chapter and the language of sections 30 to 35 necessarily simply settlement of the shops with the earlier licensees who have been running their shops in the premises belonging to them. 6. Section 30 requires the Collector to prepare a list of licences proposed to be granted for consumption on the vendors premises: The said list is to be published under section 3l inviting objections on grounds mentioned in the section. The Collector has to receive the objections under section 33 and consider 'them under section 34, for the 'purpose of deciding, for what places, retail licences would be granted. Under section 34(2), objections and opinion of the Collector have to be submitted to the Excise Commissioner who has to take a final decision in the matter. Since the reference in these sections is made to the premises and places where the shops have to run, the petitioners contend that the licences have to be granted in favour of the owners of the shops. As the premises in which the shops have been running for the last many years belong to the petitioners, no body else has got any right to carryon any business therein. By necessary implication, the petitioners must get the licences again. 7. Mr. As the premises in which the shops have been running for the last many years belong to the petitioners, no body else has got any right to carryon any business therein. By necessary implication, the petitioners must get the licences again. 7. Mr. Advocate General argued that the proposed licences are not necessarily tagged down with the particular premises so as to exclude the other members of the public from applying for the same. 8. Mr. Additional Advocate General who supplemented the argument, further contended that section 30 to 35 do not deal with the question of rate and payment of licence fee, and are concerned only with determining appropriate places for running the liquor shops applying the criteria which' have been laid down in the Act, in public interest. The Act, provides for grant of licences area-wise and although the Objections to the proposed grant are filed and considered with reference to the location of the shops, the site is not fixed rigidly with reference to the specific premises. The learned State Advocates appear to be right. 9. The section 31 speaks of the publication of the list of the places prepared under section 30 for the purpose of grant of licences at the sites of the shops "or in the vicinity." The section 34 further states that after consideration of the objections, the Collector "shall decide for what places licences for the retail sale of spirit shall be granted." The 84th paragraph of the Instructions issued by the Board of Revenues under the Act, as published in third volume of the Bihar and Orissa Excise Act, expressly states that- "When an Excise shop is settled, what is settled is the right to vend a certain excisable article in certain locality. As a general rule, it is not desirable that the sites of shops should be absolutely fixed in the sale proceedings as the person who takes settlement may find difficulty in coming to term with the owner of specific premises. On the other hand, vagueness which may mislead as to locality is to be avoided." Rule 57 also requires the list under section 30 to specify the locality and states that the list shall distinguish the proposed new licenses from the existing licenses. 10. Our attention was also drawn to Form 124 prescribed under section 30 of the Act, (at para 367 of the Manual, Vol. 10. Our attention was also drawn to Form 124 prescribed under section 30 of the Act, (at para 367 of the Manual, Vol. III) which describes 'Approximate locality of the proposed shop' in the fifth column. The Rule 100 refers to the holding of auctions in express terms. 11. Mr. Advocate General also placed before us Annexure 6 dated 12.2.84 issued in regard to the proposed auctions, which mentions the criteria fixed in regard to the selection of the places in public interest. The notification, Annexure 6, has been issued after the terms have been approved by the Board of Revenue empowered to do so under section 38(1). The fifth paragraph required the applicants to give details of the shops proposed to be run in case of licences, emphasising that places must fulfil the criteria. 12. Section 45 which is the last section in Chapter VI of the Act, also appears to be relevant. It states that no person to whom any licence has been granted under the Act, shall have any claim to it's renewal. The effect of the argument addressed on behalf of the petitioners, if accepted, will be to I nullify the section. The arguments addressed on behalf of Mr. Advocate General and Mr. Additional Advocate General are supported by the Act, Rules, Forms and Instructions and appear to be well founded. We accordingly hold that there is no mention in the claim of the petitioners that they have exclusive right to get resettlement of the shops after expiry of the period of their licences. 13. We also do not agree with the petitioners that the excise law in general does not contemplate settlement of spirit shops through public auctions. Mr. Ray contended that the Rule 100 prescribing auction as a mode of settlement is ultra vires in absence of a proper guideline in the Act. He relied on the decision in Vasanlal Maganbhai Sanjanwala vs. The State of Bombay. In that case, section 6(2) of the Bombay Tenancy Act, and Agricultural Land Acts and the notification issued under the said section fixing rates of rent payable by the tenants of the lands situate in specified areas were challenged. Having regard to the nature of the fee payable under the Excise Act, the cited decision cannot have any application. In Harshankar vs. Deputy Excise and Taxation Commissioner relied on by Mr. Having regard to the nature of the fee payable under the Excise Act, the cited decision cannot have any application. In Harshankar vs. Deputy Excise and Taxation Commissioner relied on by Mr. Additional Advocate General, the appellants before the Supreme Court filed a writ petition in the High Court of Punjab and Haryana praying for a direction quashing certain auctions held for granting the right to sell country liquor. It was contended that an auction bid for fixing 'fee' is a contradiction in terms, and the licence fee had no relationship with the services rendered to licensee and was, therefore, not a fee in true sense and it could not be justified as excise duty either. The fee was characterised as tax and was challenged on that ground. After considering the different aspects of the controversy at some length the Supreme Court pointed out the distinction between tax, fee and excise duty and held that licence fee under the excise law is neither in the nature of a tax nor of excise duty; and, 'licence fee' is not 'fee' in technical sense of the expression so as to attract the principle of quid pro quo. Dealing with the claim to do trade and business in intoxicants, it was pointed out that there was no such fundamental right and the State has the right to prohibit absolutely every form of activity in relation to the intoxicants, its manufacture, storage, export, import, sale and possession and in all manifestations these rights are vested in the State. The wider right to prohibit absolutely includes a narrower right to permit dealings in intoxicants on such terms of general application as the State deems expedient. Since these rights belong to the State, it is open to the Government to part with those rights for a consideration. By 'licence fee' is meant the price or consideration which the Government charges to the licensees for parting with its privileges and granting them to licensees. As the State can carryon a trade or business such a charge in the normal incident of a trading or business transaction including every form of activity in relation to intoxicants. 14. Mr. Additional Advocate General is right in saying that the principle enunciated by the Supreme Court is of general application and covers the excise law in Bihar. As the State can carryon a trade or business such a charge in the normal incident of a trading or business transaction including every form of activity in relation to intoxicants. 14. Mr. Additional Advocate General is right in saying that the principle enunciated by the Supreme Court is of general application and covers the excise law in Bihar. It expressly so stated in paragraph 37 of the judgment where Bihar" Act, along with many other State Acts were mentioned. In view of this clear exposition, the argument of Mr. J.N.P. Sinha based on assumption that the principle of quid pro quo is applicable has to be rejected. It further follows that in absence of any provision in the Act, or the Rules prohibiting a public auction, the Government must be held entitled to settle the shops in any fair manner. By holding an auction, the authorities are not themselves fixing any rate. They are leaving it to the' public to settle. We do not discover any objectionable element in adopting a mode whereby the true market value of the rights to be parted with can be determined by holding an auction where every member of the public is entitled to offer a bid. The State has adopted a method where no body is discriminated against and every body can take part in a sprit of healthy competition. The question of revenue may not be of paramount importance but in view of the observations made in paragraph 4 of the judgment of the Supreme Court in The Excise Commissioner U.P. Vs. Premjeet Singh Gujral. it cannot be ignored altogether as irrelevant. In the present case, we find that the amount for which the petitioners claim settlement of the shops is disproportionately too meagre as compared to the true market value, as determined by auctions which have been held recently. 15. The next point taken by Mr. Ray was that since the law vests the power of settlement of shops in the Collector and the Excise Commissioner, the State has no authority to interfere with the discretion and since in the present case the decision to hold auctions was taken in pursuance to a State directive, the same is vitiated and must de quashed. Reliance was placed on the decisions in Purtabpore Co. Ltd. Vs. Cane Commissioner of Bihar and Chandrikaika Jha vs. State of Bihar. Reliance was placed on the decisions in Purtabpore Co. Ltd. Vs. Cane Commissioner of Bihar and Chandrikaika Jha vs. State of Bihar. It has been argued on behalf of the respondents that the authority by the officers has to be exercised subject to the control of the State. It was also urged that as a matter of fact the proposal was initiated by officers themselves which was examined by a High Powered Committee (the details are given in the counter affidavit) and was then placed before the Cabinet and, therefore, in substance the decision must be treated as one taken by the Excise Commissioner himself with which the Council of Ministers agreed. The learned Advocate General offered to place the entire file in this regard for substantiating the argument but we did not consider it necessary to do so. In support of the argument that the ultimate control lies with the State, reliance was placed on section 7 (2) (a) which says that the State Government may appoint an officer to have control over the administration of the Excise Department and collection of the Excise revenue subject to the control of the State Government. Mr. Ray contended that it was necessary in the circumstances for the notification issued under section 7(2)(a) to indicate the nature and scope of the State's control and since no such. notification has been placed before this Court, the power of the Excise Commissioner appointed under this provision by the notification no. 470F dated 15.1.1919 as published on page 103 of the Excise Manual, vol. II must be treated to be final. Reference was also made to section 35 which states that Excise Commissioner is the final authority "notwithstanding anything contained in section 8". So far as Section 35 is concerned, it does not override section 7, as the non obstanti clause is confined to section 8. 16. Admittedly, the Excise Commissioner has been designated as the officer in the notification issued under section 7(2). The question is as to whether general control of the State is lost in absence of retention of power of the State therein by express terms. Mr. Additional Advocate General argued that the State, by delegating the power under section 7(2) has not parted with the same and can itself Act, whenever it so chooses. He relied on the decision of this Court in Sangram Singh Vs. The State. Mr. Additional Advocate General argued that the State, by delegating the power under section 7(2) has not parted with the same and can itself Act, whenever it so chooses. He relied on the decision of this Court in Sangram Singh Vs. The State. In that case, the petitioners were claiming exclusive privilege under section 22 of the Excise Act, for the wholesale supply of country liquor to the warehouses in the State. While dealing with the power of delegation under section 7(2) by notification no. 470 F dated 15.1.1919, referred to above, the Bench held that by issuing the notification it did not put an end to its powers to Act, under section 22. Mr. Additional Advocate General drew our, attention to the main part of section 7(2) which is common to clauses (a) to (g). In the present case, clause (a) is applicable and in Sangram Singh's case, the relevant clause was clause (e). The language of the notification of 1919 with respect to clauses (a) and (e) (as printed respectively on page 105 & 110 of the Manual Vol. II) is similar and the power of the State is not retained by express language. The reported decision, therefore, applies to the present case. We have already pointed out in paragraph 13 above that the right in relation to intoxicants in all manifestations vests in the State. It fellows that by issuing a notification under section 7(2) the State is merely choosing its delegate for the purpose of exercising powers vested in the State. As was observed by Wills, J in Huth Vs Clarke: (1890) 25 Q.B.D., 391, delegation does not simply a parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would have to do himself. The principle was accepted and followed by the Supreme Court in Godavari S. Parulekar Vs State of Maharashtra. We are, therefore, of the view that by issuing the aforementioned notification, the State Government did not denude itself of the powers in relation to the sale of spirits. 17. In the result, we hold that there is no merit in any of the points pressed on behalf of the petitioners. 18. Mr. We are, therefore, of the view that by issuing the aforementioned notification, the State Government did not denude itself of the powers in relation to the sale of spirits. 17. In the result, we hold that there is no merit in any of the points pressed on behalf of the petitioners. 18. Mr. A.B.S. Sinha, who appeared on behalf of the petitioners in C.W.J.C. 938 of 1984 relating to sale of foreign liquor contended that his case stands on a better footing as the Rule 100 prescribing public auction as one of the methods for determining the fee is not applicable to foreign liquor. His argument is that his case is governed by Rule 107 and since that rule requires licence fee to be determined on a fixed scale, the decision to settle the shops through auction is illegal. Mr. Sinha, however, very fairly conceded that the petitioners (interested in the vending licence of foreign liquor) do not have any right in this regard after expiry of the period of their licencc on the 31st March, 1984, but he urged that if the decision to settle the shops through auctions is set aside, the petitioners may have a fair chance of getting the licences as their conduct in the past has been satisfactory. 19. Section 30 to 35 of the Act, do not apply on their own force to cases of foreign liquor. Section 36, however, permits of application of these sections to other intoxticants. In view of our decision mentioned above with respect to the country liquor, these petitioners cannot take any advantage of section 30 to 35. Besides, these sections do not deal with the payment of fees at all. The relevant section on this respect is section 38 which states that every licence shall be granted on payment of fees and subject to such restrictions and in such form and in such conditions as the Board of Revenue may direct. As has been asserted on behalf of the State and not denied by any of the petitioners the notification in Annexure' was issued with the approval of the Board of or Revenue. We have already held above that the State's power in this regard under section 7(2) covers these cases. We have also pointed out that none of the provisions in the Act, or the Rules spells out a - prohibition against holding of auction. We have already held above that the State's power in this regard under section 7(2) covers these cases. We have also pointed out that none of the provisions in the Act, or the Rules spells out a - prohibition against holding of auction. Complete right with respect to every form of activity, in all manifestations, in relation to intoxicants, is' vested in the State and unless that is shown to have been cut down by some law, the State must be held to be entitled to deal with these rights in any reasonable manner. Rule 107 relied on by Mr. A.B.S. Sinha does not exclusively lay down the manner in which any fee can be settled-it prescribes only one of the modes available. We do not accept that this rule in any way cuts-down or limits the State's powers in any manner. It is true that Rule 100 does not apply to foreign liquor shops, but the exercise of the power by the State is not dependent on a Rule to that effect. Even in absence of any rule laying down a public auction as a method for settlement of licence fee, the right in this regard can be lawfully exercised. We, therefore, do not find any merit in the additional argument addressed on behalf of the petitioners claiming licence in foreign liquor. 20. For the reasons mentioned above, the writ applications are dismissed at the admission stage. Application dismissed.