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2008 DIGILAW 1409 (PAT)

Ram Narayan & Sons v. State Of Bihar

2008-09-11

NAVANITI PRASAD SINGH

body2008
Judgment 1. The petitioner challenges the validity of the proceeding initiated under the Public Demand Recovery Act, at the instance of Superintendent of Excise, Aurangabad for alleged recovery of penality in terms of condition 7(a) of the conditions of licence for the wholesale of country spirit. The penalty therein is for alleged loss of State excise duty due to short supply of spirit to warehouses under the licence aforesaid. The short point raised is that under the said provision it is the Commissioner of Excise who is competent to impose the penalty. The Commissioner never imposed any such penalty, yet, proceedings were initiated for its recovery. 2. Counter affidavit has been filed by the Superintendent of Excise, Aurangabad and rejoinder thereto has been filed. With consent of parties the writ application is being disposed of at the stage of admission itself. 3. The petitioner admittedly was granted the wholesale licence for country liquor for the period 1.11.1983 to 31.3.1987 by the permission of the Commissioner of Excise, Bihar, and as such was issued a licence in Form-27, as prescribed under the Bihar Excise Act, 1915 . Under the said licence, petitioner was obliged to supply a minimum quantity of spirit to the warehouses for selling country liquor in wholesale. If there was a short supply of spirit it naturally results in shortage of availability of country-liquor for retail sale. If there is a shortage of retail sale of country liquor State loses excise revenue as collection reduces. It is virtually to overcome this that the! provision of penalty has been made in condition 7(a) of the licence, which quoted hereunder: Condition 7(a). Failure to supply spirit as specified in condition 7 supra shall entail penalty at the discretion of the Commissioner of Excise. The penalty may extend to the amount of duty on the spirit demanded by the licensed vendors but not supplied together with compensation for any loss that may fall on Government in consequence of this failure to supply spirit. 4. Petitioner states that it so happened that during the period under consideration because of two reasons, as has been mentioned itself in the supplementary counter affidavit, there was a default on part of the petitioner to maintain the minimum supplies. 4. Petitioner states that it so happened that during the period under consideration because of two reasons, as has been mentioned itself in the supplementary counter affidavit, there was a default on part of the petitioner to maintain the minimum supplies. These facts were non-allocation and non-availability of molasses to the petitioner distillery by the State and secondly diversion of spirit held in petitioners stock by orders of the Licensing Authority, the Collector. Diverting stocks to other district because of which petitioner could not maintain his commitment to his district. Both were reasons beyond petitioners control. 5. It so happened that during the relevant period neither any proceeding were initiated in terms of condition 7(a) nor any order imposing penalty by Commissioner of Excise passed. Subsequently, when the accounts of the Excise Department were being audited by Comptroller-cum-Auditor General the fact of short supply was noticed and they made a report to the Department with regard to non-levy of penalty after quantifying the same. It is pursuant to this audit objection that the respondent-Superintendent of Excise took upon himself to initiate proceedings for recovery of the alleged penalty. This process, it is submitted is unknown to law. It is further submitted that a reference to condition 7(a) above would show that imposition of penalty is not automatic to default. It is submitted that it is the discretion of the Commissioner of Excise who may impose the penalty. The use of the expression "discretion" and "may" in condition 7(a) above, clearly predicates the non-mandatory nature of penalty. That in any view of the matter, it is submitted that the facts as brought on record by the respondents by themselves in the, supplementary counter affidavit would totally justify non-taking of any action. Penalty itself on the facts aforesaid was not called for nor justified. 6. On the other hand, the learned counsel for the State submits that there was a direction from the Office of the Commissioner to the Superintendent of Excise to take steps for imposition of penalty. It is pursuant to that penalty was imposed and rightly so. 7. Penalty itself on the facts aforesaid was not called for nor justified. 6. On the other hand, the learned counsel for the State submits that there was a direction from the Office of the Commissioner to the Superintendent of Excise to take steps for imposition of penalty. It is pursuant to that penalty was imposed and rightly so. 7. Having heard the parties, in my view, in law or in fact no penalty was ever imposed and that being so there cannot be any proceedings for recovery, thereof, as such the certificate proceedings being Case No. 8 of 2000-01 pending before the District Certificate Officer, Aurangabad, as instituted by Superintendent of Excise, Aurangabad is wholly without jurisdiction and cannot be permitted to continue. 8. fn my view, condition 7(a) is clear and categorical. Firstly, it confers jurisdiction exclusively on the Commissioner of Excise, Bihar to impose penalty. Respondents have brought on record nothing to show that there was any order or any proceeding initiated by the Commissioner of Excise for imposition of penalty, at all. From the facts pleaded all that is to be inferred is that the authority subsequently realized that penalty could have been imposed and as such quantified the same (based on audit objection) and sought to enforce its recovery. The Commissioner of Excise did not figure any where in the picture. This itself is sufficient to vitiate the entire certificate proceedings. But, I think it is my duty to dispel a misconception which the authority are carrying about the nature of the penalty and or compensation, which is contemplated under condition 7(a) of the licence. 9. It is interesting to note that on one hand, it is the Government policy to discourage consumption of liquor both from social and health point of view. The Constitution treats liquor trade as extra commercium denying fundamental right to citizens, in that regard. Yet, at the same time State chooses to use it as an instrument of making money by way of taxation and in that process encourages and enforces sale of minimum quantity of country liquor, failing which penalties are to be recovered for loss of taxes, a contradiction and dichotomy which this Court fails to appreciate. 10. The use of expression "discretion" and "may" in condition 7(a) of the licence clearly predicates that imposition of penalty is not as a matter of course and/or automatic. 10. The use of expression "discretion" and "may" in condition 7(a) of the licence clearly predicates that imposition of penalty is not as a matter of course and/or automatic. Penalty and compensation as found and contemplated in condition 7(a) are quasi-criminal in nature, as has been held by the Apex Court in the case of M/s Hindustan Steel Ltd. vs. The State of Orissa, AIR 1970 Supreme Court 253 and in the case of The Commissioner of Income Tax, West Bengal vs. Anwar Ali, AIR 1970 Supreme Court 1782. In the earlier case of Hindustan Steel (supra) their Lordships have held thus in paragraph 7: "........But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether Penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.........." 11. Thus, seen from the fact admitted and brought on record in the supplementary counter affidavit of the respondents themselves there was two specific cogent reasons why supplies were deficient. (1) Shortage of molasses which is totally Government controlled commodity and secondly diversion of stocks of spirit to other places by orders of Licensing Authority. Naturally, these facts were not in the knowledge of the auditor when they gave a note for penalty and the respondents acted merely on the recommendation of the auditor without even issuing notice to the petitioner in this regard. 12. Another aspect of the matter is as noticed by the Apex Court above that penalty is a quasi-criminal impost. Naturally, these facts were not in the knowledge of the auditor when they gave a note for penalty and the respondents acted merely on the recommendation of the auditor without even issuing notice to the petitioner in this regard. 12. Another aspect of the matter is as noticed by the Apex Court above that penalty is a quasi-criminal impost. It creates a burden on the petitioner. Thus, firstly, a notice has to be issued in this regard. Notice by the competent authority has two significance, one as the imposition of penalty is discretionary, by notice the Commissioner assumes jurisdiction to impose penalty and secondly by notice the party proceeded against is forewarned of what is to follow and his response is solicited as in the words of the Apex Court in the case of Hindustan Steel (supra) "penalty will not also be imposed merely because it is lawful to do so". Admittedly, in the present case, neither did the Commissioner assume jurisdiction in the matter nor any proceeding were initiated by issuance of notice to the petitioner. Thus, the so-called penalty was assessed, imposed and being sought to be recovered by a process which is wholly without jurisdiction and a process which is wholly unknown to law. 13. in the result, I have no option but to set aside the entire certificate proceedings as against the petitioner in the aforesaid case. The same is quashed and the writ application is allowed.