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2001 DIGILAW 693 (KAR)

KAP CHEM LIMITED, BANGALORE v. STATE OF KARNATAKA

2001-09-06

P.VISHWANATHA SHETTY

body2001
P. VISHWANATHA SHETTY, J. ( 1 ) THE petitioner, in this petition, is an Industrial Unit engaged, inter alia, in the manufacture of acetic acid out of rectified spirit from molasses. ( 2 ) IN this petition, the petitioner has prayed for quashing order dated 17th of November, 2000, a copy of which has been produced as Annexure-C to the writ petition, passed by the second respondent-Commissioner for Excise, wherein the claim made by the petitioner for refund of licence fee came to be rejected; and also for a further direction to the respondents to refund a sum of Rs. 21,27,000/- to the petitioner with interest at 18 per cent from the date of the collection of the said amount from the petitioner till the date of the refund of the amount. ( 3 ) FEW facts, which may be relevant for the disposal of this petition and which are not in serious dispute, may be stated as hereunder: (A) The petitioner had initially obtained Distillery Licence in terms of the provisions contained in Karnataka Excise (Distillery and Warehouse) Rules, 1967 (hereinafter referred to as 'the Rules'), during the excise year 1979-80. The said licence was being renewed every year till the excise year 1993-94. (B) The distillery of the petitioner was closed for the excise year commencing from 1st July, 1994 to 30th June, 1995 to 1st July, 1998 to 30th June, 1999. However, on the application dated 24th September, 1998 made by the petitioner seeking renewal of the licence for the excise year 1998-99, the licence was renewed retrospectively for the excise years 1994-95 to 1997-98 and also for the year 1998-99. ( 4 ) MISS Birdy Aiyappa, learned Counsel appearing for the petitioner, in support of the prayer of the petitioner, made two submissions. Firstly, she submitted that there is no power conferred on the respondents to collect licence fee for the period during which there was no licence in existence, and for the period during which the petitioner had not carried on any business on the basis of any licence obtained. Therefore, she submitted that the licence fee paid for the excise years 1994-95 to 1997-98 and 1998-99 is required to be refunded to the petitioner. Therefore, she submitted that the licence fee paid for the excise years 1994-95 to 1997-98 and 1998-99 is required to be refunded to the petitioner. Secondly, she submitted that since the said payment was made by mistake by the petitioner on an erroneous impression that the petitioner was liable to make the said payment and the said amount has been collected by the respondents without any authority of law, the respondents are under an obligation to refund the said amount to the petitioner. In support of her submissions, she relied upon a Division Bench decision of this Court in the case of State of Karnataka v Patric D'souza1. She also relied upon the decision of the Hon'ble Supreme Court in the case of Sales Tax officer, Banaras and Others v Kanhaiya Lal Makund Lal Saraf and others and drew my attention to the observation made by the Supreme court at paragraph 26 in the said decision. ( 5 ) HOWEVER, Smt. Niloufer Akbar, learned High Court Government Pleader appearing for the respondents, strongly supporting the action of the respondents in refusing to refund the licence fee already paid by thepetitioner, made two submissions, Firstly, she submitted that unless the licence of the petitioner was made current by retrospectively renewing it for the excise years 1994-95 to 1997-98, the petitioner was not entitled for the renewal of the licence for the excise year 1998-99; and in that background, if the petitioner had voluntarily paid the licence fee to get the licence renewed for the Excise Years 1994-95 to 1997-98, the petitioner cannot now seek refund of the licence fee already paid by it. Elaborating this submission, the learned Government Pleader pointed out that whether a licence should be renewed in terms of Rule 6 of the rules or not, is a matter which lies in the discretion of the second respondent. The second respondent, while exercising his discretion, was entitled to take into consideration the financial loss the State was put to, on account of the conduct of the petitioner by not getting the licence renewed and also closing down the industrial unit. The second respondent, while exercising his discretion, was entitled to take into consideration the financial loss the State was put to, on account of the conduct of the petitioner by not getting the licence renewed and also closing down the industrial unit. Therefore, she submitted that in this background, if the petitioner had paid the licence fee to make the licence current retrospectively for the years 1994-95 to 1997-98, the petitioner cannot be permitted to contend that the collection of the licence fee for the period in question was without the authority of law. Secondly, she submitted that the conduct of the petitioner totally disentitles it for any equitable relief at the hands of this Court. She pointed out that the petitioner, in its letters dated 24th September, 1998, 7th November, 1998 and 27th February, 1999, copies of which have been produced as Annexures-R1, R2 and R3 respectively along with the statement of objections, had undertaken to pay the licence fee to make the licence retrospectively current for the Excise Years 1994-95 to 1997-98; and when such an undertaking was given and on the basis of such undertaking, the second respondent, who is conferred with the discretion of renewal of licence, was made to exercise the discretion in favour of the petitioner, the petitioner cannot be permitted to contend before this Court that the collection of the licence fee was one without the authority of law. She further submitted that there is no truth or merit in the claim made by the petitioner that the petitioner made the payment by a mistaken impression without knowing that the petitioner was not liable to pay the licence fee to get the licence renewed. She also submitted that the fact that the petitioner had paid the licence fee for the period in question, clearly shows that the value of the licence which the petitioner got renewed, is much more than the licence fee which the petitioner had paid. She also submitted that the fact that the petitioner had paid the licence fee for the period in question, clearly shows that the value of the licence which the petitioner got renewed, is much more than the licence fee which the petitioner had paid. It is her further submission that if the petitioner were to get the licence renewed every year and were to carry on business, the State would have been able to collect huge tax by way of excise duty and other taxes in respect of the excise articles manufactured by the petitioner in its distillery; and since the petitioner did not carry on business during the period in question, the State was put to huge loss; and therefore, the relief claimed by the petitioner deserves to be denied on the short ground that the conduct of the petitioner disentitles it for any relief. In support of her submission, she relied upon the Division bench decision of this Court in the case of M/s. Encee Distillers v State of Karnataka1, wherein this Court has affirmed the view taken by the learned Single Judge of this Court rejecting the similar contentions. ( 6 ) IN the light of the rival contentions advanced by the learned Counsel appearing for the parties, the only question that would arise for consideration in this petition is, whether the petitioner is entitled for the refund of the licence fee paid by it for the excise years 1994-95 to 1998-99? ( 7 ) ADMITTEDLY, the industrial unit of the petitioner was closed for the period from 1-7-1994 to 30-6-1999 and the licence of the petitioner was not renewed. Rule 4 of the Rules provides for grant of licence. Rule 5 of the Rules provides that a licence granted or renewed under the Rules shall expire on the last day of June of the next following year. Rule 6 of the Rules provides for renewal of licence on an application being made by a licensee accompanied by a licence fee as prescribed under Rule 7 of the Rules, to the second respondent-Commissioner. Rule 7 of the Rules prescribes the licence fee in respect of various types of licences, referred to therein. It may be useful to refer to Rules 4, 5 and 6 of the Rules, which read as hereunder:"4. Grant of licence. Rule 7 of the Rules prescribes the licence fee in respect of various types of licences, referred to therein. It may be useful to refer to Rules 4, 5 and 6 of the Rules, which read as hereunder:"4. Grant of licence. On receipt of the application under Rule 3 and after such verification referred to therein, the Commissioner may grant, with the previous sanction of the State Government, a licence in Form 2 subject to these rules and the conditions of the licence. 5. Duration of licence. A licence granted or renewed under these rules shall expire on the last day of June next following. 6. Renewal of licence. A licence may be renewed on application being made to the Commissioner accompanied by the licence fee prescribed in Rule 7". Rule 6 of the Rules, referred to above, as noticed by me earlier, provides for 'renewal of a licence'. The 'renewal of a licence', referred to under rule and of the Rules, pre-supposes existence of a valid licence. Rule 7 of the Rules provides for imposition of licence fee. If there is no valid licence, in my considered view, the question of renewal of a licence does not arise for consideration. If there is no valid licensee, the remedy open to the party is to make an application for grant of fresh licence in terms of Rule 4 of the Rules. Therefore, if a licensee, whose licence has expired, intends to get his licence renewed, such licensee is required to get the licence renewed for a further period so as to make it valid for the period during which it stood expired. Under these circumstances, if the petitioner, with a view to get his licence renewed, agreed to pay the licence fee for the period during which the licence stood expired and on that basis, got the licence renewed, it is not permissible for the petitioner to contend that the collection of the licence fee by the second respondent for the period in question was without the authority of law. In this connection, it is useful to refer to the relevant portion of the statement made by the 'petitioner in letter Annexure-R1, dated September 24, 1998, Annexure-R2, dated 7th November, 1998 and Annexure-R3, dated February 27, 1999 written by it to the second respondent. In letter annexure-R1, it is stated thus:". . . . . . . . . . In this connection, it is useful to refer to the relevant portion of the statement made by the 'petitioner in letter Annexure-R1, dated September 24, 1998, Annexure-R2, dated 7th November, 1998 and Annexure-R3, dated February 27, 1999 written by it to the second respondent. In letter annexure-R1, it is stated thus:". . . . . . . . . . NOW, we plan to revive the Distillery Unit on completion of the Effluent Treatment Plant and request for your permission to sell the alcohol for potable purposes. We have to renew the licence for the years 1996-97, 1997-98 and the current excise year of 1998-99. The total amount of Distillery licence fee for above 3 years works out to Rs. 21,27,500. 00. With great difficulty, we have somehow paid Rs. 7,50,000/- vide State bank of Mysore Challan No. 41, dated 16-2-1998 towards part payment for the renewal of our Distillery Licence for the excise year 1997-98. This leaves a balance amount of Rs. 9. 00 lakhs payable for renewal of the licence for the years 1996-97 and 1997-98. Over and above this we have to pay a sum of Rs. 9,77,500/- (Rupees Nine Lakhs Seventy-Seven Thousand and Five Hundred only) as renewal fee of the Distillery Licence for the current excise year 1998-99. We are making arrangements to pay the sum of Rs. 9,77,500/- for renewal of our Distillery Licence for the current excise year 1998-99. In view of our extremely precarious financial position, we request your goodself to: (a) renew our distillery licence for the current excise year i. e. , 1998-99 upon payment of Rs. 9,77,500/- being the licence fee and cess for the current year. (b) grant us time till 30-6-1999 to clear the balance of arrears of distillery licence fee for the years 1996-97 and 1997-98 amounting to Rs. 9. 00 lakhs. We request your goodself to kindly view our case sympathetically in the light of the closure of our plant for the last five years and grant our request". In Annexure-R2, it is stated as follows. "with reference to the above, we would like to draw your kind attention to our letter No. KCL/pk/ec/98/960, dated 24-9-1998, wherein we had informed your goodself that an amount of Rs. 21,27,500/- was due towards renewal of distillery licence for a period of three years an amount of Rs. In Annexure-R2, it is stated as follows. "with reference to the above, we would like to draw your kind attention to our letter No. KCL/pk/ec/98/960, dated 24-9-1998, wherein we had informed your goodself that an amount of Rs. 21,27,500/- was due towards renewal of distillery licence for a period of three years an amount of Rs. 2,50,0007- was paid vide state Bank of Mysore, Challan No. 41, dated 18-2-1998 living a net due of Rs. 18,77,500/ -. In this letter we had requested your goodself for the following: (a) renewal of our distillery licence for the current Excise Year i. e. , 1998-99 upon payment of Rs. 9,77,500/- being the licence fee and cess for the current year. (b) granting us time till 30-6-1999 to clear the balance of arrears of distillery licence fee for the years 1996-97 and 1997-98 amounting to Rs. 9. 00 lakhs. We are awaiting your kind confirmation on the above. Upon receiving your confirmation we will renew our distillery licence for the current excise year i. e. , 1998-99 after paying the necessary renewal fees for the current year. We hope to receive your favourable response at the earliest". In letter Annexure-R3, it is stated as follows:"we have informed your goodself vide our above referred letter that an amount of Rs. 21,27,500/- is due towards renewal of the distillery licence fee for the period 1996-97, 1997-98 and 1998-99. We have also informed your goodself that an amount of Rs. 2,50,000/- has been paid vide State Bank of Mysore, Challan No. 41, dated 18-2-1998. Therefore, the balance amount payable for the above mentioned period is Rs. 18,77,500/ -. As your goodself is aware our unit has been closed for the last 6 years due to sudden decontrol of molasses and alcohol. As such, our financial position has become very precarious and we are not in a position to pay this complete amount and get our distillery licence renewed. However, with great difficulty we have managed to arrange the funds to the tune of Rs. 9,77,500/- which we can pay immediately towards fees for renewal of the distillery licence for the year 1998-99. In view of the above, we request your goodself to renew our distillery licence after we have paid Rs. 9,77,500/- and grant us 24 equal monthly instalments to pay the balance amount of Rs. 9. 00 lakhs. 9,77,500/- which we can pay immediately towards fees for renewal of the distillery licence for the year 1998-99. In view of the above, we request your goodself to renew our distillery licence after we have paid Rs. 9,77,500/- and grant us 24 equal monthly instalments to pay the balance amount of Rs. 9. 00 lakhs. We await your kind confirmation on the above to enable us to pay rs. 9,77,500/- immediately and get our distillery licence renewed". The reading of the said three letters makes it clear that the petitioner intended to get the licence renewed for the period from 1994-95 to 1997-98 and licence for the excise year 1998-99; and therefore, had voluntarily paid the licence fee for the said period to the second respondent to get the licence renewed. Merely because the petitioner did not carry on business or got the licence renewed retrospectively, in my view, it is not a ground to accept the contention of the petitioner to take the view that the collection of the licence fee voluntarily paid by the petitioner was one without authority of law and the payment was made by mistake. Further, as rightly contended by the learned Government Pleader, the conduct of the petitioner also totally disentitles it for any equitable relief at the hands of this Court. Under Rule 6 of the Rules, discretion is conferred on the second respondent to renew the licence. No doubt, it is true that the said discretion is required to be exercised by the second respondent in a fair and reasonable manner and consistent with the object for which the power is conferred on him. Normally, when once a licence is granted especially to a distillery where huge investment is made, unless there is a good ground, the second respondent cannot refuse to renew a licence. However, if the conduct of the licensee, who has sought for renewal of the licence, is such that without any justification, such a licensee has refused to get his licence renewed; or his industrial unit was closed down; and on account of all these factors, the State was put to huge financial loss, it is for the second respondent in that situation, taking into consideration several relevant circumstances, to take a decision whether a licence has to be renewed or not. Therefore, in the background of the discretion conferred on the second respondent either to renew the licence or not to renew the licence depending upon the facts and circumstances of the case, if the petitioner, with a view to avoid any adverse decision being taken against its interest by the second respondent by rejecting its prayer for renewal of licence, had voluntarily paid the licence fee for the period during which the licence stood expired, with a view to persuade the Licensing Authority that the petitioner is serious in continuing the business and it intends to minimise the loss caused to the State, in my view, the petitioner cannot be permitted to contend before this Court by invoking its extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India, that the licence fee collected is without the authority of law or it must be refunded to it. If, in my view, the petitioner were not to voluntarily pay the licence fee for the period in question, having regard to the fact that the industrial unit of the petitioner was closed and it did not get the licence renewed for a considerable length of time, it was open to the second respondent to reject the prayer of the petitioner for renewal of the licence. Therefore, if the petitioner had voluntarily made the payment of the licence fee for the period in question and got the licence renewed for the period in question, in my view, the petitioner is not entitled for the refund of the licence fee on the ground that by mistake, the licence fee was paid. The petitioner, as stated earlier, is an industrial unit and carrying on business in liquor ever since the year 1979-80. The contents of letters, Annexures-R1 to R3, referred to above, do not indicate that there was any mistake on the part of the petitioner in paying the licence fee. I am unable to accept the contention of the learned Counsel for the petitioner that the payment was made by mistake. As noticed by me earlier, the payment was made with full knowledge by the petitioner that it was required to pay the licence fee to make the licence which has expired, current and valid to get the licence renewed for the subsequent period. As noticed by me earlier, the payment was made with full knowledge by the petitioner that it was required to pay the licence fee to make the licence which has expired, current and valid to get the licence renewed for the subsequent period. Therefore, I am also of the view that the conduct of the petitioner also does not entitle it for any equitable relief at the hands of this Court. The division Bench of this Court, in the case of M/s. Encee Distillers, supra, fairly under similar circumstances, while confirming the similar view expressed by the learned Single Judge of this Court, has observed at paragraph 5 of the judgment, thus:"5. . . . . IT is conceded before us that to establish a distillery a person is required to obtain a licence before the commencement of the business/establishment of distillery. Such licence can be got renewed only in terms of Rule 6 read with Rule 7. No person can be permitted to break the continuity of licence granted to him and seek its renewal, according to his convenience, at any time of his choice. Such an interpretation, if given, would deprive the State of huge revenues which it is authorised to collect on the ground of parting with the exclusive right of dealing in liquor business. Subrule (2) of Rule 7 only deals with the situation where the licensee obtains a licence during the part of the licence year and is obliged to pay the fee for the remaining year under clauses (i) and (ii) of sub-rule (2 ). Similarly, if a person, for any reason, is not in a position to get the licence renewed for the whole year, he has the liberty, subject to regulations and satisfaction of the licensing authority, to get the licence renewed for the part of the year and pay the fee in terms of clauses (i) and (ii) of sub-rule (2 ). Similarly power is conferred upon the licensing authority to renew the licence, under peculiar circumstances not for the whole year, but a part thereof any by demanding the fee in terms of clauses (i) and (ii) of sub-rule (2 ). Similarly power is conferred upon the licensing authority to renew the licence, under peculiar circumstances not for the whole year, but a part thereof any by demanding the fee in terms of clauses (i) and (ii) of sub-rule (2 ). As the licence year expires on the last day of the month of June in a year, the fee prescribed under clauses (i) and (ii) refers to the portion of the year by directing the payment of the licence fee proportionately without adversely affecting the public revenues. If a person gets a licence granted or renewed after 1st of January, he is liable to pay for the rest of the period, i. e. , 6 months, notwithstanding anything contained in sub-rule (1) of Rule 7 of the Rules. Similarly if a person obtains a licence by renewal after 1st of April he is obliged to pay the licence fee for the remaining period of three months notwithstanding the date of grant or renewal in his favour. Thus there is no substance in the submissions of the learned Counsel for the appellants that the grant or renewal has to be only for a full period of one year and not for any period lesser than one year. Rule 5 refers to only the last day of the licence year and Rule 6 refers to the renewal of licence in terms of Rule 7 which prescribes the fee either for the whole year or for a part thereof for which the licence is granted or renewed. No other interpretation is possible. There appears to be no illegality in the demands made by the respondents". ( 8 ) IN my view, the decision of this Court in the case of Patric D'souza, supra, relied upon by the learned Counsel for the petitioner is of no assistance to her. In that case, the petitioner had obtained CL-9 licence as provided under the provisions of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968. However, after the expiry of the licence, the petitioner applied for a fresh CL-9 licence. While the licensing Authority decided to grant a fresh licence, the petitioner was called upon to pay the licence fee for the period during which his licence had expired. However, after the expiry of the licence, the petitioner applied for a fresh CL-9 licence. While the licensing Authority decided to grant a fresh licence, the petitioner was called upon to pay the licence fee for the period during which his licence had expired. When the demand was made for payment of licence fee, this Court took the view that the petitioner in the said writ petition, was entitled for grant of CL-9 licence without insisting on the payment of licence fee for the period during which the licence had expired. It is necessary to point out that under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968, there was no provision at the relevant time for renewal of the licence. Every licensee, whose licence had expired, was required to secure a fresh licence. Therefore, the principle laid down in the said decision, in my view, has no bearing to the facts of the present case where there is a provision made under Rule 6 of the Rules for renewal of the licence. Further, the petitioner in that case, did not approach the Court after paying the licence fee for the expired period of licence and persuading the Licensing Authority to renew the licence. In my view, the facts in the case of M/s. Encee Distillers, supra, is identical to the facts of the present case. Apart from that, I am in respectful agreement with the view expressed by the Division Bench of this Court in the case of M/s. Encee Distillers, supra. I am also unable to accept the submission of the learned Counsel for the petitioner that the petitioner made the payment and gave the undertaking in view of the show-cause notice issued to it proposing to cancel the licence. If the petitioner was aggrieved by the said show-cause notice, nothing prevented it from challenging the same if the petitioner felt that the show cause notice was not valid in law. In my view, the decision of the Hon'ble Supreme Court in the case of Sales Tax Officer, supra, has no application to the facts of the present case as already found, the licence fee was not paid by the petitioner by mistake. ( 9 ) IN the light of the discussion made above, this petition is liable to be dismissed and accordingly, it is dismissed. Rule issued is discharged. ( 10 ) ). ( 9 ) IN the light of the discussion made above, this petition is liable to be dismissed and accordingly, it is dismissed. Rule issued is discharged. ( 10 ) ). However, no order is made as to costs. ( 11 ) SMT. Niloufer Akbar, learned Government Pleader, is permitted to file her memo of appearance within four weeks from today. --- *** --- .