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Jharkhand High Court · body

2018 DIGILAW 913 (JHR)

Narendra Singh Bhandari v. State of Jharkhand

2018-04-24

RAJESH SHANKAR

body2018
ORDER : 1. These Batch of writ petitions have been preferred challenging the demand notices issued to petitioners on account of short lifting of Monthly Guarantee Quota (MGQ). In some writ petitions, the loss of revenue in terms of excise duty, import duty and permit fee has been demanded, whereas in other set of writ petitions apart from the demand of loss of revenue, penalty has also been imposed. 2. Since the issues involved in all these writ petitions are common, the same are being disposed of by this common judgment. 3. The case of the petitioners as stated in the writ petitions is that they were allotted the retail liquor shops in pursuance of the sale notifications advertised in different financial years by the Deputy Commissioners of the concerned District in the State of Jharkhand. During the license period, there was some short fall in lifting of the MGQ. After the end of the license period, the petitioners demanded refund of the security money in as much as neither there was any outstanding dues of the department against them nor their licenses were cancelled. However, the respondents refused to refund the security deposit of the petitioners, rather impugned demands were raised on the alleged ground of non-lifting of MGQ. 4. The learned counsel for the petitioners submits that in terms of Clause 12 of the license, the petitioners had an obligation to lift 1/12th of the MGQ by the end of the last working day of every month which was subject to rule 17 of the Jharkhand Excise (Settlement of Licenses for Retail Sale of Liquor) Rules, 2009 (in short “the Settlement Rules”) which inter-alia provides for consequence of failure to lift the monthly MGQ i.e. carrying forward of the un-lifted quota to the next month but not beyond that. In view of the condition of the license read with the provisions of the Jharkhand Excise Act, 1915 (in short “the Act, 1915”), the only action for breach of lifting MGQ which could be taken by the authorities, was forfeiture of the un-lifted quota and/or cancellation of the license under section 42 of the Act, 1915 read with rule 25 of the Settlement Rules. No such action for cancellation of license was taken against the petitioners for breach of the conditions of license, which otherwise could not have been taken as the breach as the same was not on account of any overt act of the petitioners intentionally violating the license conditions but on account of the fact that the demand and consumption of country liquor/spiced country liquor was not as per the quota so fixed by the department. The petitioners could have only bought such quantity of liquor which could be sold from their retail shops. It is further submitted that none of the conditions of the license, provisions of the Act, 1915 and the Settlement Rules, empowers the licensing authority/respondents to levy and recover the excise duty and/or penalty on the un-lifted quota of liquor. Thus, the action of the respondents seeking collection of excise duty is without any authority of law. It is further submitted that even as per clause 19 of the sale notification dated 11.02.2013, the licensing authority could have taken action for imposition of penalty/composition fee only in accordance with the Act, 1915, the Settlement Rules and notifications framed/issued thereunder. However, none of the provisions contained in the Act, 1915, Settlement Rules and the notifications during the relevant period empowered the licensing authority to recover excise duty or any fees for the un-lifted quota of country liquor. It is also submitted that section 68 of the Act, 1915, as it existed during the relevant period i.e. 2013-14, provided maximum fine of Rs. 10,000/- which could have been imposed, but there is absolutely no provision so as to justify the impugned action of the respondents. It is further submitted that the grant of license is in the realm of contract and the terms and conditions of contract cannot be altered unilaterally by one of the parties. In the present case, the recovery of excise duty on the un-lifted quota by unilaterally altering the terms and conditions of the license is totally impermissible in law. It is also submitted that the excise authorities are the creature of statute and they must lay hand on some statutory provisions for exercise of their powers. They are not competent to make any demand which is not authorized by the statutory provisions contained in the Act, 1915, the Settlement Rules or the conditions of the license. It is also submitted that the excise authorities are the creature of statute and they must lay hand on some statutory provisions for exercise of their powers. They are not competent to make any demand which is not authorized by the statutory provisions contained in the Act, 1915, the Settlement Rules or the conditions of the license. The levy in the present form since it partakes the colour of tax, amounts to compulsory exaction of money by the State through an executive fiat without any legislative sanction. The impugned levy is wholly without any authority of law and thus violative of Article 265 of the Constitution of India. It is further submitted that rule 19 of the Settlement Rules provides for refund of the security deposit upon expiry of the license after adjusting the dues if any. In absence of any dues against the petitioners which could be lawfully recovered from them, the recovery of excise duty and/or penalty on the un-lifted MGQ is mala-fide and arbitrary exercise of power. The impugned demand also suffers from violation of the principles of natural justice as neither any notice to show cause was issued nor any proceeding was initiated before forfeiting the security deposit. Moreover, the petitioners were not entitled to advertise or allure consumption of liquor by the public and therefore the lifting of country liquor and spiced country liquor from the manufactures being totally dependent upon the demand and consumption, the petitioners could not do anything either to enhance the sale and consumption of liquor and consequently to lift the entire quota. It is also submitted that the tax cannot be imposed merely on the intendment of the Government, rather there must be a specific law regarding incidence of payment of tax. The tax cannot be levied by an executive instruction of the State Government, rather it has to flow from the legislation made specifically to that effect. 5. The learned counsel for the petitioners, in support of his argument, puts reliance on the following judgments:- (i) Ahmedabad Urban Development Authority Vs. Sharadkumar Jayantikumar Pasawalla, (1992) 3 SCC 285 (ii) State of U.P. and Others Vs. Saraya Industries Ltd. (2006) 11 SCC 129 (iii) National Trading Corporation Vs. State of Bihar and Others, 1991 (2) PLJR 622 (iv) Bimal Chandra Banerjee Vs. Sharadkumar Jayantikumar Pasawalla, (1992) 3 SCC 285 (ii) State of U.P. and Others Vs. Saraya Industries Ltd. (2006) 11 SCC 129 (iii) National Trading Corporation Vs. State of Bihar and Others, 1991 (2) PLJR 622 (iv) Bimal Chandra Banerjee Vs. State of Madhya Pradesh ETC, (1970) 2 SCC 467 (v) Civil Writ Jurisdiction Case No. 18863 of 2015, Md. Daud Khan Vs. State of Bihar through the Secretary, Excise and Prohibition Department and Others with analogous cases. 6. Per contra, the learned counsel appearing on behalf of the respondents submits that the license fee is required to be deposited by 20th of each month and in case of delay, it carries interest @ 5% per day. It is further submitted that in the last part of the Clause-1 of license, it has clearly been stipulated that on expiry of the period of license, the arrears of revenue shall be adjusted from the security amount and in case of no dues, the same shall be returned to the licensee until it is forfeited in any other matter in accordance with law. An amount equivalent to one month license fee is taken in advance against security deposit and the same is adjusted/returned after the expiry of the license. A sale notification in Form- 127(Ka) is also issued in each financial year and in Clause-13(Ka) of the said sale notification, it is clarified that the security amount shall be 1/12th part of the annual license fee and the said amount shall be deposited by the licensee immediately after settlement of the shop. It has been mentioned in Clause-28 of the sale notification that all the terms and conditions as mentioned in sale notification are deemed to be terms of the license and violation of the same is punishable under section 42 of the Act, 1915. Further, under clause 18 of the sale notification, it has been clearly stated that 1/12th part of the minimum annual quota has to be lifted in each month which is mandatory. Clause 18 also provides that the licensees shall ensure the sale of entire stock before completion of the license period. It is further submitted that Clause-19 of the sale notification speaks that in case of any violation of the terms of the license causing loss of revenue, the licensing authority shall impose penalty/composition fee and shall proceed under the Act, 1915 for cancellation of license. It is further submitted that Clause-19 of the sale notification speaks that in case of any violation of the terms of the license causing loss of revenue, the licensing authority shall impose penalty/composition fee and shall proceed under the Act, 1915 for cancellation of license. Clause 19 is in accordance with the provisions of sub-Section-9 of section 2 of the Act, 1915 which deals with the definition of Excise Revenue i.e., the revenue derived or derivable from any duty, fee, tax, payment (other than a fine imposed by a Criminal Court) or confiscation imposed or ordered under this Act or any other law, for the time being in force, relating to liquor or intoxicating drugs. It is also submitted that on perusal of the provisions of the Settlement Rules, the terms of license, the sale notification and definition of Excise Revenue provided in Section 2(9) of the Act, 1915, it would be crystal clear that if there is less lifting of MGQ, the State Government suffers loss and this loss is termed as the part of excise revenue. Thus, in case of loss of this revenue, the authority, in order to compensate the same, can forfeit the security amount by making assessment of the un-lifted MGQ by imposing penalty/composition fee as the petitioner as well as the respondents are bound by the terms and conditions of sale notification. It is further submitted that the respondents considered the case of the petitioners and found that due to less lifting of quota, the consequential loss of revenue has been caused to the State of Jharkhand. Thus, in accordance with the provisions of law, the loss of excise revenue caused due to less lifting of MGQ was determined and the same has been adjusted from the earnest/security money of the petitioners and other licensees as the State has suffered loss of revenue due to non-lifting of the prescribed MGQ. The licensees are bound to lift the MGQ which is mandatory as per the terms of license as well as the sale notification and thus, the petitioners have got no case for consideration by this Court as the respondents have simply exercised their power to compensate the loss of revenue. Moreover, all these conditions were made known to the licensees since day one and as such the petitioners cannot even take a plea of ignorance of the provision. Moreover, all these conditions were made known to the licensees since day one and as such the petitioners cannot even take a plea of ignorance of the provision. The petitioners, if aggrieved by the calculation of loss of revenue or the amount of adjustment, have got remedy to approach the licensing authority itself. Moreover, if the licensees are otherwise aggrieved, they can move before the Appellate Authority/Revisional Authority viz. the Excise Commissioner/ the Board of Revenue respectively under section-8 of Bihar Excise Act, 1915 adopted by the State of Jharkhand. The present writ petitions are not maintainable in view of the alternative remedy available to the petitioners by way of appeal and revision. There is no provision for initiation of any proceeding or passing of an order for assessing the loss of revenue hence simply assessment in form of calculation was made and the same was adjusted from the earnest money. Nevertheless, notices were issued to the petitioners seeking explanation as to why action should be not taken in accordance with law for recovery of the revenue loss from the security amount. However, no explanation was submitted and hence, the assessment were made and the same were adjusted from the security amount of the petitioners. It is further submitted that the judgment passed by the Patna High Court in Civil Writ Jurisdiction Case No. 18863 of 2015 cited on behalf of the petitioners is not relevant in this case as the said case was regarding recovery of “Movement Fee” but in the present case, the dispute is with regard to failure in lifting of MGQ. The learned counsel for the respondents in support of his argument puts reliance on a judgment rendered by the Hon’ble Supreme Court in the case of State of Orissa and Others Vs. Narain Prasad and Others, (1996) 5 SCC 740 . 7. Heard the learned counsel for the parties and perused the materials available on record. The petitioners, in these batch of writ petitions, have challenged the demand raised from them by the respondent authorities alleging loss of revenue to the government due to non-lifting of the MGQ. 8. Narain Prasad and Others, (1996) 5 SCC 740 . 7. Heard the learned counsel for the parties and perused the materials available on record. The petitioners, in these batch of writ petitions, have challenged the demand raised from them by the respondent authorities alleging loss of revenue to the government due to non-lifting of the MGQ. 8. The State of Jharkhand notified the excise policy for retail licenses on 20.02.2009 by which it was decided that the annual license fee shall be determined based on the MGQ of the liquor shop by including the excise duty payable on foreign liquor/Country liquor/ Spiced Country liquor. In order to give effect to the policy, in exercise of the power conferred under section 89 of the Act, 1915, the Settlement Rules has been framed by the State of Jharkhand. The English version of the relevant portion of the Settlement Rules as has been mentioned in W.P. (C) No. 213 of 2017 are quoted herein-below: “Rule 2(m) defines ‘Annual Minimum Guarantee Quota’ to be the minimum quota of liquor as determined by the licensing authority to be lifted from the wholesale warehouse during the excise year or part thereof for the purpose of retail sale by the licensee: Rule 3(e) defines ‘licence fee’ to be the fixed fee for each of the retail shops as mentioned in the sale notification. Rule 5 empowers the licensing authority to determine the Minimum Guarantee Quota of each of the liquor shops. Rule 7 provides for issuance of a sale notification in Excise Form No. 127 and as per clause (2) the terms and conditions of the sale notification shall be deemed to be the terms and conditions of the license. Rule 14 provides for payment of 1/12th of the Annual license fee to be paid as security money and 1/6th of the annual license fee to be deposited as advance license fee. Rule 17 provides for monthly division of the annual MGQ in 12 equal instalments. The license shall have to lift one part thereof every month. If due to unavoidable reason the licensee failed to lift the MGQ in a particular month the license may by an application request to the authority to add the balance quantity to the next MGQ. However, under no circumstances the monthly quota shall exceed double the specified quota for a particular month. If due to unavoidable reason the licensee failed to lift the MGQ in a particular month the license may by an application request to the authority to add the balance quantity to the next MGQ. However, under no circumstances the monthly quota shall exceed double the specified quota for a particular month. Rule 19 provides for refund of advance security monthly upon adjustment of dues and claims of the State Government with regard to the settled shops. Rule 20 provides that the licensee shall ensure sale of the entire Minimum Guarantee Quota before expiry of the license and the unsold stock shall be disposed in terms of Instructions contained under 117. Rule 25 provides that on violation of the provisions of these rules, conditions of the license or conditions of the sale notification or general conditions applicable to vend license, action for suspension and cancellation of license will be taken under section 42 of the Jharkhand Excise Act. Rule 25 further provides that if the license is cancelled under rule 25(1), the license fee, security money or any other amount deposited by the licensee shall be forfeited.” 9. In exercise of power conferred under rule 7 of Settlement Rules, the Deputy Commissioner issued sale notification under Excise Form-127 (ka). For deciding the batch of these writ petitions, the relevant provisions of the sale notification issued in connection with W.P.(C) No. 4450 of 2016, as has been mentioned in the said writ petition are quoted as under:- “Clause 18(ka) provides that the licensee shall be bound to lift the 12th part of the annual MGQ every month. On lifting of 15% more than the specified quota, no license fee shall be levied however on lifting of excess of 15%, license fee shall be levied. Clause 18(kha) provides that under special circumstances the un-lifted quota of the month lifted in the next month shall not be treated as additional lifting/issue. Clause 18(gha) provides that the licensees of the district shall be bound to lift the MGQ specified for their shops. Clause 19 provides that on violation of such condition of the license which has caused loss of revenue, for imposition of penalty/composition fee and cancellation of license, the licensing authority shall take action in accordance with the provisions of the Excise Act, Rules, notifications, orders and Instructions.” 10. Clause 19 provides that on violation of such condition of the license which has caused loss of revenue, for imposition of penalty/composition fee and cancellation of license, the licensing authority shall take action in accordance with the provisions of the Excise Act, Rules, notifications, orders and Instructions.” 10. It is the admitted case of the petitioners that they have failed to lift the MGQ as had been fixed in the sale notification. However, the thrust of the argument of the learned counsel for the petitioners is that the demand raised by the respondents is without any authority of law as no provision has been made either in the Act, 1915 or the Settlement Rules, which describe about the consequence of short lifting of MGQ enabling the authorities to recover the excise duty and penalty on the un-lifted quota. On the other hand, the learned counsel appearing for the respondent-State has contended that the Settlement Rules as well as the sale notification specifically provide that the lifting of MGQ is the mandatory requirement and as the State has been put to loss of revenue due to non-lifting of the MGQ, the demand of loss of revenue as well as the penalty has been raised which is completely justified and legal. 11. I have perused the judgments cited by the learned counsel for the parties. Learned counsel for the petitioners has placed reliance on the judgment rendered by the Hon’ble Supreme Court in the case of Saraya Industries Ltd. (supra) wherein the Hon’ble Supreme Court has held that although by way of regulatory measures directions may be issued with regard to the maintenance of register in such a manner in which the wasted holograms were to be maintained, but by reason of an executive fiat, a unit cannot be made responsible to compensate any loss to the revenue as a consequence of such wastage of holograms. In that case, Their Lordships observed that during the period in question, there neither existed any rule nor any notification was issued by the State. The licence did not contain any clause relating to payment of excise duty either by way of penalty or damages for loss and/or damage caused to the security holograms. Further in para 39 of the said judgment, Their Lordships’ held as under:- “39. It is accepted by Mr. The licence did not contain any clause relating to payment of excise duty either by way of penalty or damages for loss and/or damage caused to the security holograms. Further in para 39 of the said judgment, Their Lordships’ held as under:- “39. It is accepted by Mr. Dwivedi that legislation relating to excise duty is relatable to Entry 51, List II of the Seventh Schedule of the Constitution of India. If that be so, provision for imposition of such duty or evasion thereof must be provided in terms of the law. By reason of an executive order, a presumption cannot be raised. No penalty can be levied. The matter would have been different, if the same was provided for, as has been sought to be done now, by way of terms and conditions of licence or in terms of the Rules. By reason of an executive instruction, the provisions of the law cannot be effaced. A legislative policy, furthermore, must be laid down by the State. The matter relating to an excise policy must be framed by the State. It cannot be done by the Excise Commissioner. A distinction must be borne in mind between the concept of excise duty on production and manufacture of liquor and parting with the exclusive privilege of the State. Imposition of a penalty would not come within the purview of either of the two. When a price is fixed by the State for parting with its exclusive privilege, the same must again be provided in terms of the statute and the rules framed thereunder or by way of terms of licence.” 12. On perusal of the policy framed by the State of Jharkhand in the year 2009 for settlement of liquor shops as well as Settlement Rules, it would appear that the lifting of MGQ is the mandatory requirement. Further, clause-19 of the sale notification also provides that in case of violation of any terms and conditions of the license, the revenue loss has to be realized from the licensee. The fact of the present case is entirely different from the case of Saraya Industries Ltd. (supra), thus the same does not help the case of the petitioners in any manner. 13. The fact of the present case is entirely different from the case of Saraya Industries Ltd. (supra), thus the same does not help the case of the petitioners in any manner. 13. Learned counsel for the petitioners has placed further reliance upon the judgment rendered in the case of Ahmedabad Urban Development Authority (supra.) wherein the Hon’ble Supreme Court has held as under:- “7. After giving our anxious consideration to the contentions raised by Mr. Goswami, it appears to us that in a fiscal matter it will not be proper to hold that even in the absence of express provision, a delegated authority can impose tax or fee. In our view, such power of imposition of tax and/or fee by delegated authority must be very specific and there is no scope of implied authority for imposition of such tax or fee. It appears to us that the delegated authority must act strictly within the parameters of the authority delegated to it under the Act and it will not be proper to bring the theory of implied intent or the concept of incidental and ancillary power in the matter of exercise of fiscal power..........” (Emphasis supplied) 14. In the case of National Trading Corporation (supra), a Single Bench of Patna High Court held as under:- “8. After having carefully examined the statutory provisions brought to my notice I am of the considered opinion that none of the provisions either of the Act or the rules empower the excise authorities to levy and collect any amount by way of establishment charges under consideration. The legislature and its delegates i.e., the State Government and the Board of Revenue wherever intended to levy charges, have made specific provisions in this regard. I am unable to accept the contention of the learned Advocate General that since in case of some of the functionaries provisions have been made for levy of establishment charges; therefore, the petitioners should also be subjected to similar charges. Any such presumption is wholly unwarranted. Any compulsory exaction of money by the State through its officers partakes the color of tax under the constitutional law. Under Article 265 of the Constitution no tax can be levied and collected except under the authority of law. The law here means the Act of Legislature and the subordinate legislations made there under. Any such presumption is wholly unwarranted. Any compulsory exaction of money by the State through its officers partakes the color of tax under the constitutional law. Under Article 265 of the Constitution no tax can be levied and collected except under the authority of law. The law here means the Act of Legislature and the subordinate legislations made there under. No tax, which includes the nature of demands under challenge, can be imposed under executive fiat without any legislative sanction. This aspect of the constitutional law has been well explained and firmly laid down by the Supreme Court in the case of A. Venkata Subbarao and Others Vs. State of Andhara Pradesh, AIR 1965 SC 1773 .” 15. Further, in a judgment rendered in the case of Bimal Chandra Banerjee (supra), the Hon’ble Supreme Court has held as under:- “13. Neither Section 25 nor Section 26 nor Section 27 nor Section 62(1) or clauses (d) and (h) of Section 62(2) empower the rule-making authority viz. the State Government to levy tax on excisable articles which have not been either imported, exported, transported, manufactured, cultivated or collected under any licence granted under Section 13 or manufactured in any distillery established or any distillery or brewery licensed under the Act. The Legislature has levied excise duty only on those articles which come within the scope of Section 25. The rule-making authority has not been conferred with any power to levy duty on any articles which do not fall within the scope of Section 25. Therefore it is not necessary to consider whether any such power can be conferred on that authority. Quite clearly the State Government purported to levy duty on liquor which the contractors failed to lift. In so doing it was attempting to exercise a power which it did not possess.” 16. The learned counsel for the respondents has relied upon the judgment rendered by the Hon’ble Supreme Court in the case of Narain Prasad (supra). The fact of the said case was that the licensees voluntarily entered into contracts with the Government of Orissa with an undertaking to lift a particular quantity of liquor every month and also to remit the monthly excise duty in two equal instalments on the fifth and fifteenth day of the month. The licensees were the highest bidders in respect of the various liquor shops in Orissa. Their bids were accepted. The licensees were the highest bidders in respect of the various liquor shops in Orissa. Their bids were accepted. They executed agreements in the prescribed form and were issued licences. Each of them had undertaken under the agreement/contract to lift a particular specified quantity of liquor every month during the relevant excise year (1990-1991) as well as to remit the excise duty as specified in the Settlement Rules. They carried out the business under the said licences for the entire excise year. However, the licensees failed to lift the agreed MGQ. They also failed to remit the excise duty as provided by Rule 6-A. and when the notices were issued by the excise authorities calling upon them to remit the appropriate amount, they preferred writ petitions before the Orissa High Court questioning the issuance of demand notices on the ground that the demand for payment of excise duty on unlifted quantity of arrack amounts to levy of duty which is not warranted by the Act, 1915. In the said case, the Orissa High Court quashed the demand notices. Aggrieved thereby, the State of Orissa moved before the Supreme Court. Their Lordships having taken into consideration the ratio laid down in the case of Bimal Chandra Banerjee (supra.) and the subsequent decisions held as under:- “20. The licensees-respondents submit that the present cases, having regard to the language of the enactment, Rules and conditions of the licence fall within the ratio of the above decisions while the State of Orissa submits that these cases properly fall within the ratio of the decisions in PannaLal and Prabhakara Reddy. Before referring to these decisions, it would be appropriate, in our opinion, to refer to the decision of the Constitution Bench in Har Shankar v. Dy. Excise and Taxation Commr. In Har Shankar one of the objections raised by the State to the maintainability of the writ petitions filed by the licensees was that the writ petitioners were seeking to enforce contractual rights thereby. This was denied by the writ petitioners therein. They said, they were merely seeking to vindicate their legal rights. The contention of the writ petitioners was repelled by this Court in the following words: “The short answer to this contention is that the bids given by the appellants constitute offers and upon their acceptance by the Government a binding agreement came into existence between the parties. They said, they were merely seeking to vindicate their legal rights. The contention of the writ petitioners was repelled by this Court in the following words: “The short answer to this contention is that the bids given by the appellants constitute offers and upon their acceptance by the Government a binding agreement came into existence between the parties. The conditions of auction become the terms of the contract and it is on those terms that licences are granted to the successful bidders in Form L. 14-A of the Rules.” The Court further observed: “One of the reliefs which the appellants ask for is that Rules 27-A, 30 and 31 be declared ultra vires and unconstitutional and consequently the respondents be directed to refund the assessed fees already recovered. By attempting to exploit the licences without the burden of assessed fees originally attaching to them under the Rules framed by the Financial Commissioner, the appellants are seeking to work the licences on such terms as they find convenient. The writ jurisdiction of High Courts under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred. That, however will not estop the appellants from contending that the amended Rules are not applicable as their licences were renewed before the amendments were made.” (Emphasis added) 21. The approach adopted in this decision has to be borne in mind in every such case. It is also to be kept in mind that while the decisions referred to hereinbefore are by smaller Benches, this decision is by a Constitution Bench. A person who enters into certain contractual obligations with his eyes open and works the entire contract, cannot be allowed to turn round, according to this decision, and question the validity of those obligations or the validity of the Rules which constitute the terms of the contract. The extraordinary jurisdiction of the High Court under Article 226, which is of a discretionary nature and is exercised only to advance the interests of justice, cannot certainly be employed in aid of such persons. Neither justice nor equity is in their favour. 26. The decision in Har Shankar was followed in State of Haryana v. Jage Ram. This Court observed: “In view of these decisions, the preliminary objection raised by the learned Solicitor General to the maintainability of the writ petitions filed by the respondents has to be upheld. Neither justice nor equity is in their favour. 26. The decision in Har Shankar was followed in State of Haryana v. Jage Ram. This Court observed: “In view of these decisions, the preliminary objection raised by the learned Solicitor General to the maintainability of the writ petitions filed by the respondents has to be upheld. We hold accordingly that the High Court was in error in entertaining the writ petitions for the purpose of examining whether the respondents could avoid their contractual liability by challenging the Rules under which the bids offered by them were accepted and under which they became entitled to conduct their business. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.” (Emphasis supplied) 33. A review of the decided cases of this Court on the subject indicates a clear shift in the way this matter has been looked at. Initially, the matter was looked at from the point of view of the levy of excise duty. On that basis, it was held that unless there is a sale, no duty can be collected (Bimal Chandra Banerjee, Gappulal and Ram Kumar). But then a different viewpoint emerged with the Constitution Bench decision in Har Shankar which was carried forward in Panna Lal, Jage Ram and Y. Prabhakara Reddy. These decisions look at the matter from the point of view of the several payments being, in truth and effect, consideration for the grant of privilege/licence. They point out that the excise duty is a duty on manufacture and production and not on sale. It was a case, they said, where the duty was being passed on to the licensee who in turn passed it on to the consumer. What all the licensee paid, they held, is nothing but consideration for the grant of licence and the mere fact that the total consideration fixed comprises several elements (including excise duty), it cannot be said that excise duty is levied upon the licensee. In our opinion, the Orissa matters fall under the ratio of PannaLal and Y. Prabhakara Reddy and not under the ratio of Bimal Chandra Banerjee, Gappulal and Ram Kumar. In our opinion, the Orissa matters fall under the ratio of PannaLal and Y. Prabhakara Reddy and not under the ratio of Bimal Chandra Banerjee, Gappulal and Ram Kumar. The amounts mentioned in Rules 6 and 6-A, as also the undertakings contained therein, together constitute the consideration for grant of privilege/licence, determined by auction, as contemplated by Section 29 of the Act. As explained hereinbefore, the obligation to remit the excise duty is independent of the sale/purchase of liquor; it is payable on or before the specified dates every month; it is an addition to the monthly instalment payable under Rule 6; its remittance is not tied up to the purchase of M.G.Q. except to the extent that the licensee has to pay the prescribed instalment of excise duty prior to the lifting of the liquor. It, therefore, cannot be said that there is any levy of excise duty upon the licensee. The concept here is altogether different. It is a case where the consideration payable by the licensee for grant of licence is made up of monthly rental plus excise duty besides the obligation to purchase the M.G.Q. The licensee pays the rental and excise duty as undertaken by him under the agreement/contract executed by him and as required by conditions of the licence under which he is doing business, i.e., as and by way of consideration. Indeed, the Rules could have provided that the entire amount provided under Rules 6 and 6-A should be paid in advance before the issuance of licence in which event it could not have been contended that it is not in consideration of grant of licence. Merely because the Rules provide a concession and provide for collection of the said amounts in convenient instalments spread over the year, the nature and character of the payments cannot change. 35. It is difficult to agree with Mr. Sorabjee. Firstly, these observations are found in the opinion of Oza, J. alone. The majority opinion does not express any opinion on this aspect. Secondly, what does the expression ‘privilege’ mean in the context of intoxicating liquors? The expression is not defined in the Act. In the context of excise enactments, the expression ‘privilege’ really means the licence or permit granted by the State. The majority opinion does not express any opinion on this aspect. Secondly, what does the expression ‘privilege’ mean in the context of intoxicating liquors? The expression is not defined in the Act. In the context of excise enactments, the expression ‘privilege’ really means the licence or permit granted by the State. We may explain: the State is entitled to prohibit the trade in intoxicating liquors altogether; it can impose a total ban; no citizen can claim any fundamental right to manufacture or to trade in these liquors; it is, however, open to the State to lift the ban partially and allow the trade in liquor to be carried on in the manner prescribed; the State says that a citizen can trade in liquor only under a licence to be granted by it for the consideration specified in that behalf and that the trade therein can be carried on only in accordance with the regulatory provisions prescribed by it in that behalf. It is this grant of licence/permit, which is called or is described sometimes as grant of privilege. We do not think that the observations of Oza, J. relied upon by Mr. Sorabjee can be understood as disabling the State from granting licences and permits for trading in and/or manufacture of intoxicating liquors for a consideration. Nor can they be understood as precluding the State from carrying on the trade or manufacture of the said liquors by itself or its agents. The learned Judge seems to have looked at the matter from an idealistic and moralistic angle. The learned Judge observed that in the light of Articles 21 and 47: “It is not possible to accept any privilege of the State having the right to trade in goods obnoxious and injurious to health.” 36. Lastly, we may also invoke the holding in Har Shankar and Jage Ram that the writ petitioners, having entered into agreements voluntarily, containing the conditions aforesaid and having done the business under the licences obtained by them, cannot be allowed to either wriggle out of the agreements nor can they be allowed to challenge the validity of the Rules which constitute the terms of the contract. The High Court should not have exercised its extraordinary discretionary jurisdiction under Article 226 of the Constitution in aid of such licensees.” 17. The High Court should not have exercised its extraordinary discretionary jurisdiction under Article 226 of the Constitution in aid of such licensees.” 17. In the aforesaid case, the Hon’ble Supreme Court after taking into consideration the earlier judgments, observed that there are two types of cases decided by the Hon’ble Supreme Court. One set of cases are those wherein Their Lordships observed that the excise duty cannot be levied unless there is a sale, however, in the other sets of cases, it has been held that if the licensee has agreed to pay certain sum of money by way of consideration for obtaining privilege, he cannot turn round by saying that no excise duty is payable without any sale. 18. In the case in hand, the Government of Jharkhand by reasons of the Policy, 2009, resolved that the MGQ would be fixed for every shops by the Excise Commissioner on the basis of the population of the area and thereafter the annual license fee would be determined on the MGQ of the liquor shop by including the excise duty payable on foreign liquor/country liquor/spiced country liquor. Accordingly, it was directed that on the annual MGQ of the liquor shops, the license fee would be determined @ Rs. 50 per LPL on the country liquor shops and @ Rs. 150/- per LPL on the foreign liquor shops. 1/12th of the said license fee was to be deposited as security deposit and also 1/6th part of license fee was to be paid in advance which was to be adjusted in the last two months. It was made obligatory on the part of the licensee to deposit the monthly license fee by the 20th day of every month. It was further provided that on lifting of the MGQ, the licensee would also pay excise duty in case of foreign liquor @ 25/- per LPL @ 40/- per LPL and @ Rs. 60/- per LPL of which making cost is upto Rs. 500/-, Rs. 501/- to Rs. 800/- and Rs. 801/- or more respectively. It was further provided that in case of country liquor, the excise duty would be paid @ Rs. 5/- per LPL and for spiced country liquor, the excise duty would be paid @ Rs. 6/- per LPL. 19. 60/- per LPL of which making cost is upto Rs. 500/-, Rs. 501/- to Rs. 800/- and Rs. 801/- or more respectively. It was further provided that in case of country liquor, the excise duty would be paid @ Rs. 5/- per LPL and for spiced country liquor, the excise duty would be paid @ Rs. 6/- per LPL. 19. On conjoint reading of Policy, 2009, Settlement Rules as well as the sale notification, it would be evident that the lifting of MGQ is the mandatory requirement. The purpose for introducing the concept of MGQ appears to be for preventing use of illicit liquor as also to secure the revenue of the State. The consequence of non-lifting of MGQ has been provided under clause 19 of the sale notification wherein it is mentioned that if State has caused loss of revenue due to violation of the condition of license, necessary action shall be taken under the relevant provisions of the Act, 1915, the Settlement Rules, notification or Order. Further, Section 42 of the Act, 1915 provides the conditions under which any license can be suspended or cancelled. Sub-section 1(c) of Section 42 of the Act, 1915 permits the authority to cancel or suspend the license of any person who or any of his servants or by any one acting on his behalf with his express or implied permission has committed any breach of the license. Sub-section 4 of Section 42 of the Act, 1915 manifests that if the license is cancelled for violation of any of the conditions mentioned in that section, the licensee shall not be entitled for any compensation or to the refund of any fee paid or deposit made in respect of the license. 20. It is not the case of the petitioners that they have not violated the terms and conditions of the licenses, rather they have contended that there is no provision in the Act, 1915 or the Settlement Rules which provides for levy of revenue loss or imposition of penalty and as such the action of the respondent authorities is beyond the provision of law. I do not find any substance in the said contention of the petitioners. 21. In the case of Rajendra Singh Vs. State of M.P. (1996) 5 SCC 460 , the Hon’ble Supreme Court has held as under:- “6. I do not find any substance in the said contention of the petitioners. 21. In the case of Rajendra Singh Vs. State of M.P. (1996) 5 SCC 460 , the Hon’ble Supreme Court has held as under:- “6. It has been held by a Constitution Bench of this Court in Har Shankar v. Dy. Excise and Taxation Commr. that: “The writ jurisdiction of High Courts under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred.” At the same time, it was observed that the licensees are not precluded from seeking to enforce the statutory provisions governing the contract. It must, however, be remembered that we are dealing with parties to a contract, which is a business transaction, no doubt governed by statutory provisions. While examining complaints of violation of statutory rules and conditions, it must be remembered that violation of each and every provision does not furnish a ground for the court to interfere. The provision may be a directory one or a mandatory one. In the case of directory provisions, substantial compliance would be enough. Unless it is established that violation of a directory provision has resulted in loss and/or prejudice to the party, no interference is warranted. Even in the case of violation of a mandatory provision, interference does not follow as a matter of course. A mandatory provision conceived in the interest of a party can be waived by that party, whereas a mandatory provision conceived in the interest of the public cannot be waived by him. In other words, wherever a complaint of violation of a mandatory provision is made, the court should enquire — in whose interest is the provision conceived. If it is not conceived in the interest of the public, question of waiver and/or acquiescence may arise — subject, of course, to the pleadings of the parties. This aspect has been dealt with elaborately by this Court in State Bank of Patiala v. S.K. Sharma and in Krishan Lal v. State of J&K on the basis of a large number of decisions on the subject. Though the said decisions were rendered with reference to the statutory rules and statutory provisions (besides the principles of natural justice) governing the disciplinary enquiries involving government servants and employees of statutory corporations, the principles adumbrated therein are of general application. Though the said decisions were rendered with reference to the statutory rules and statutory provisions (besides the principles of natural justice) governing the disciplinary enquiries involving government servants and employees of statutory corporations, the principles adumbrated therein are of general application. It is necessary to keep these considerations in mind while deciding whether any interference is called for by the court — whether under Article 226 or in a suit. The function of the court is not a mechanical one. It is always a considered course of action. 7. There is yet another fact. The contract provides for payment of monthly rental on or before a particular date. If the amount of monthly rental is not paid before the due date, the licence is liable to be cancelled as provided by sub-section (1) of Section 31. It is true that before cancelling the licence, an opportunity of hearing should be given as provided by sub-section (1-A). While the opportunity to be given should be reasonable, the reasonableness or otherwise of the opportunity given must be judged keeping in view the time-frame available. It is a case of a contract stipulating monthly payments. If there is a default in paying a month’s rental, notice proposing cancellation may follow. The time given to the licensee to show cause would naturally be a short one for the reason that soon thereafter the next month’s rental (licence fee) falls due and if that is not paid, another show-cause notice may have to follow. (It must be remembered that in this case, the default was for two consecutive months, July and August. The authorities evidently did not act in haste. Even after one month’s default, they waited hoping that he would pay. But when he defaulted for the next month also, they issued the notice proposing cancellation.) What we wish to emphasise is that the opportunity contemplated by sub-section (1-A) cannot be operated in a leisurely manner. A realistic view has to be taken while determining whether the opportunity given was reasonable or not. The object of all excise laws is twofold viz., to raise revenue and to regulate the trade in liquors which is a noxious substance. There is no fundamental right to trade in liquor (Khoday Distilleries Ltd. v. State of Karnataka). A realistic view has to be taken while determining whether the opportunity given was reasonable or not. The object of all excise laws is twofold viz., to raise revenue and to regulate the trade in liquors which is a noxious substance. There is no fundamental right to trade in liquor (Khoday Distilleries Ltd. v. State of Karnataka). The only right of the licensee is to seek to enforce the terms of contract (which is statutory in nature) and the statutory provisions governing the contract. The considerations aforementioned should be kept in mind while examining complaints of violation of statutory rules, conditions and terms of contract as well as complaints of lack of reasonable opportunity.” 22. The Hon’ble Supreme Court in a judgment rendered in the case of State of Punjab and Another Vs. Devans Modern Breweries Ltd. and Others, (2004) 11 SCC 26 , has held as under:- “121. The conduct of the respondent licensee in attempting to wriggle out of his contractual obligations is contrary to the clear and unequivocal principle laid down in Har Shankar case. The issuance of liquor licence constitutes a contract between the parties i.e. between Excise Authorities on the one hand and the individual applicant contractor on the other. The respondent having accepted the contracts/licences, having fully exploited the advantage flowing from the contract to the exclusion of others and having reaped rich commercial benefits from that activity, it is not open to the contractor to wriggle out from the contract by challenging, inter alia, any particular condition of that contract/licence. The respondent herein seeks to do exactly that by challenging the condition requiring him to pay import fee. Har Shankar case clearly disentitles the liquor contractor from wriggling out of contractual obligations solemnly undertaken. Likewise, in Panna Lal case this Court in the specific context of liquor licence had this to say: (SCC p. 638, para 21) “21. The licences in the present case are contracts between the parties. The licensees voluntarily accepted the contracts. They fully exploited to their advantage the contracts to the exclusion of others. The High Court rightly said that it was not open to the appellants to resile from the contracts on the ground that the terms of payment were onerous. The licences in the present case are contracts between the parties. The licensees voluntarily accepted the contracts. They fully exploited to their advantage the contracts to the exclusion of others. The High Court rightly said that it was not open to the appellants to resile from the contracts on the ground that the terms of payment were onerous. The reasons given by the High Court were that the licensees accepted the licence by excluding their competitors and it would not be open to the licensees to challenge the terms either on the ground of inconvenient consequence of terms or of harshness of terms........” 23. Thus, when a contract contains a particular stipulation and the parties to the contract enter into the contract being fully aware of such stipulation, they are precluded from saying that such terms are not binding on them for some pretext or the other, unless the said stipulation appears to be contrary to the law. 24. In the present case, the respondent authorities, by way of impugned demand, have sought to recover the loss of revenue as well as the penalty equal to the amount of revenue. So far the demand with regard to loss of revenue is concerned, the said stipulation has been clearly mentioned in Clause 19 of sale notification and the petitioners have entered into the agreement with full knowledge about the content of the agreement that they are bound to lift the MGQ and any loss of revenue would be recovered from them. Thus, in case of failure on their part, they are bound to face the consequence provided in Clause-19 of the sale notification itself. The petitioners, at this juncture cannot turn around by contending that such stipulation has not been mentioned in the Act, 1915 or Settlement Rules. The petitioners have failed to show any provisions of the Act, 1915 or the Settlement Rules which prohibits the State to put any restriction while granting the license of liquor. Moreover, the intention of the State is clearly reflected from the policy, Settlement Rules, as well as the sale notification which making it mandatory for the licensee to lift the MGQ in order to prevent the loss of revenue. Even if, no separate provision has been made in the Settlement Rules for levying loss of revenue, it does not make any difference in the case of the petitioners. Even if, no separate provision has been made in the Settlement Rules for levying loss of revenue, it does not make any difference in the case of the petitioners. The intendment of realization of shortfall in MGQ in terms of revenue is imbedded in the concept of MGQ itself in absence of which, the very purpose of “MGQ” loses its relevance. 25. The petitioners appears to have the notion that whatever amount has been levied upon them is the excise duty, which is not permissible in absence of any specific provision under any law made by the competent authority. In fact, the amount sought to be recovered from them is the loss of revenue, the payment of which has already been agreed by the petitioners at the time of lifting of MGQ. In view of the ratio laid down in the case of Narain Prasad (supra), the State Government is competent to recover the same. The judgment of the Hon’ble Supreme Court rendered in the cases of Bimal Chandra Banerjee (supra), Ahmedabad Urban Development Authority (supra.) and National Trading Corporation (supra.) as cited by the learned counsel for the petitioners were related to the levy of tax without any authority of law and thus would have no application in the present case. 26. Accordingly, the demand notices issued to the petitioners to the extent of loss of revenue in terms of excise duty, import duty and permit fee do not require any interference by this court. 27. In one set of writ petitions, the penalty equal to the amount of excise duty, has also been imposed upon the petitioners in default of non-lifting of MGQ. The provision regarding imposition and the manner thereof has neither been provided in the Policy, 2009 nor in the Settlement Rules. However, in the sale notification, it has been provided that the licensee, alongwith loss of revenue shall also be liable for payment of penalty in case of default of any of the provisions of the sale notification. 28. In the case of ESI Corporation Vs. HMT Ltd. (2008) 3 SCC 35 , the Hon’ble Supreme Court held as under:- “25. The statute itself does not say that a penalty has to be levied only in the manner prescribed. It is also not a case where the authority is left with no discretion. 28. In the case of ESI Corporation Vs. HMT Ltd. (2008) 3 SCC 35 , the Hon’ble Supreme Court held as under:- “25. The statute itself does not say that a penalty has to be levied only in the manner prescribed. It is also not a case where the authority is left with no discretion. The legislation does not provide that adjudication for the purpose of levy of penalty proceeding would be a mere formality or imposition of penalty as also computation of the quantum thereof became a foregone conclusion. Ordinarily, even such a provision would not be held to providing for mandatory imposition of penalty, if the proceeding is an adjudicatory one or compliance with the principles of natural justice is necessary thereunder.” 29. On perusal of the aforesaid judgment, it would emerge that when a statute provides for imposition of penalty as also computation of the quantum thereof, the authorities are left with no discretion. However, in a case where it is upon the discretion of the authority to adjudicate upon the penalty, any such decision is to be taken after providing an opportunity of hearing to the defaulter and the decision must be based on the sound legal principle. In the instant case, although in the sale notification, there is a stipulation about the imposition of penalty, yet the imposition of penalty being a punitive action can’t be imposed by making provision in sale notification, rather the provision of penalty should flow from the statute itself. The respondents have also failed to show any justifiable reason before this Court for imposition of penalty equal to the amount of the revenue loss. The levy of penalty is a penal action and thus should be construed strictly. 30. It appears that in the year 2007, the State of Bihar, by way of amendment, has incorporated sub-section (h) in section 42 of the Bihar Excise Act, 1915 which provides for levying of equal amount of loss revenue as a penalty. However, no such amendment has been carried out by the State of Jharkhand. The penalty cannot be imposed as per the wish of authorities without any specific provision for the same in the statute. Penalty cannot be understood as a consequence to any default, rather it is a separate liability for which there must be a specific provision, in absence thereof, the same cannot be imposed. 31. The penalty cannot be imposed as per the wish of authorities without any specific provision for the same in the statute. Penalty cannot be understood as a consequence to any default, rather it is a separate liability for which there must be a specific provision, in absence thereof, the same cannot be imposed. 31. For the reasons as aforesaid, the demand raised by the respondent authorities on account of loss of revenue in terms of excise duty, import duty, license fee is upheld. However, if the petitioners have any grievance with regard to the quantum/calculation of demand, they may move before the appropriate authority seeking correction thereof. So far as the demand raised with respect to penalty is concerned, the same is, hereby, quashed and set aside. 32. All the writ petitions stand disposed of in terms with the aforesaid observation. 33. Consequently, pending I.A No. 1983 of 2017 in W.P. (C) No. 212 of 2017 and I.A No. 1984 of 2017 in W.P. (C) No. 213 of 2017 are also disposed of.