M/S Pernod Ricard India (P) Ltd. Thr. vs The State Of Madhya Pradesh

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IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR

BEFORE
HON'BLE SHRI JUSTICE MILIND RAMESH PHADKE
th
ON THE 27 OF JULY, 2026
WRIT PETITION No. 2130 of 2020
M/S PERNOD RICARD INDIA (P) LTD. THR.
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Sameer Kumar Shrivastava - Advocate for the petitioner.
Smt. Monica Mishra - Govt. Advocate for the respondents/State.
ORDER
This petition under Article 226 of the Constitution of India has been filed by
the petitioner seeking following reliefs:-
"a. A writ of certiorari may kindly be issued to quash order
Annexure P-1 dated 06.11.2019 passed by respondent no.3.
b. A writ of mandamus/an appropriate writ may kindly be
issued declaring the levy of penalty on the basis of late submission
of EVC to-be directory instead of being mandatory.
C. Any other relief(s) which this Hon'ble High Court deems
fit in the facts and circumstances of the case may also kindly be
granted."
Short facts of the case that the petitioner, M/s Pernod Ricard India (P) Ltd.,
is a company incorporated under the Companies Act, 1956 and is engaged in the
manufacture and export of Indian Made Foreign Liquor (IMFL). The petitioner
holds a valid bottling licence under the provisions of the Madhya Pradesh Excise
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Signing time: 7/27/2026
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Act, 1915 and exports IMFL to various States under the export permits issued by

the Excise Department. The licences, permits and passes granted under the Excise
Act are governed by the provisions of the Madhya Pradesh Excise Act, 1915 and
the Madhya Pradesh Foreign Liquor Rules, 1996. Rule 13 of the Rules of 1996
requires an exporter to obtain an Excise Verification Certificate (EVC) from the
Excise Officer of the importing State certifying receipt of the consignment and to
furnish the same to the authority issuing the export permit within forty days from
the expiry of the permit period. During the month of May, 2013, the petitioner
exported various consignments of IMFL to different destinations under valid
export permits. The Excise Verification Certificates in respect of the said
consignments were subsequently received from the authorities of the importing
States and were furnished before the concerned Excise authorities, though beyond
the period prescribed under Rule 13 of the Rules of 1996. Thereafter, the Deputy
Excise Commissioner, Divisional Flying Squad, Gwalior issued an order dated
06.11.2019 bearing No. H.7ag./A./2019/1934 directing the petitioner to deposit a
sum of Rs.1,44,00,000/- as penalty on account of delayed submission of the Excise
Verification Certificates. Subsequently, an intimation dated 15.11.2019 was issued
to the petitioner informing it that, on the basis of an audit objection, penalty had
been found payable for belated submission of the Excise Verification Certificates.
A chart indicating the consignments in respect of which the Excise Verification
Certificates had been submitted after the prescribed period was also supplied to the
petitioner. Aggrieved by the order dated 06.11.2019, the petitioner has preferred
the present writ petition.
Learned counsel for the petitioner submitted that the impugned order dated
06.11.2019, whereby a penalty of Rs.1,44,00,000/- has been imposed solely on the
ground of delayed submission of Excise Verification Certificates (EVCs), is
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arbitrary, illegal and unsustainable in law, as the impugned order has been passed

in complete violation of the principles of natural justice and no show cause notice
was issued as well as no opportunity of hearing was afforded to the petitioner
before imposing the penalty. There has been no adjudication regarding any breach
allegedly committed by the petitioner, nor has the authority recorded any finding
that the petitioner had violated any statutory provision or licence condition
warranting imposition of penalty.
Learned counsel further submitted that the export consignments had
admittedly reached their destinations and the corresponding Excise Verification
Certificates were ultimately produced before the authorities. The only allegation
against the petitioner is that the certificates were submitted beyond the period
prescribed under Rule 13 of the Madhya Pradesh Foreign Liquor Rules, 1996. The
issuance of an Excise Verification Certificate is entirely dependent upon the
Excise authorities of the importing State and is beyond the control of the exporter.
Consequently, delay attributable to third-party Government authorities cannot be
made a ground to penalise the petitioner.
It was next contended that the requirement relating to submission of the
Excise Verification Certificate within the stipulated period is merely procedural
and intended to verify that the exported liquor has reached its destination. Once the
factum of export and receipt of the consignment stands duly established through
the verification certificates, delayed submission thereof cannot invalidate the
export transaction or attract penal consequences. It was, therefore, submitted that
the time limit prescribed under Rule 13 is directory and not mandatory.
In support of the aforesaid submission, learned counsel placed reliance upon
the judgment of the Karnataka High Court in Bacardi India Pvt. Ltd. v. State of
Karnataka & Others, 2019 (5) Kar. LJ 696, wherein it was held that the
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requirement regarding submission of the verification certificate within the

prescribed period is directory, since compliance depends upon the actions of
authorities over whom the exporter has no control. Reliance was also placed upon
the judgment of the Kerala High Court, as noticed in paragraph 26 of the said
decision, wherein it was held that procedural requirements regarding production of
verification certificates cannot override the substantive fact that the goods had
actually been exported and duly verified.
Learned counsel further submitted that the impugned penalty has been
imposed merely on the basis of an audit objection without any independent
application of mind by the competent authority. The authority mechanically acted
upon the audit report without examining whether any breach had in fact been
committed or whether any loss had been caused to the State. In support of this
submission, reliance was placed upon the decision of the Supreme Court in State
of Bihar v. Industrial Corporation Pvt. Ltd., (2003) 11 SCC 465, wherein it was
held that before creating any demand of penalty there must be an adjudication
regarding the alleged breach and the affected party must be afforded an
opportunity of hearing. The Supreme Court further held that statutory authorities
cannot mechanically impose penalty solely on the basis of an audit report and are
required to independently examine whether any breach of law or licence
conditions has actually been committed.
It was lastly submitted that there is neither any allegation of diversion or
misuse of liquor nor any allegation that the consignments failed to reach their
destinations. In the absence of any loss to the State exchequer or any finding of
misuse of the export permits, the imposition of penalty solely for delayed
submission of the Excise Verification Certificates is wholly unjustified. It is thus
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prayed that the impugned order dated 06.11.2019 be quashed and Rule 13 of the

Madhya Pradesh Foreign Liquor Rules, 1996 be construed as directory insofar as
the period prescribed for submission of the Excise Verification Certificate is
concerned.
Per contra, learned Government Advocate has supported the impugned order
and has submitted that Rule 13 of the Madhya Pradesh Foreign Liquor Rules, 1996
mandates submission of the Excise Verification Certificate within the prescribed
period. It is further contended that timely submission of the EVC is an essential
statutory requirement to verify lawful export of liquor and to prevent misuse or
diversion of consignments. Since the petitioner admittedly failed to submit the
EVCs within the stipulated time, the competent authority was justified in imposing
the prescribed penalty. It is, therefore, urged that the impugned order suffers from
no legal infirmity warranting interference under Article 226 of the Constitution of
India.
Heard counsel for the parties and perused the record.
The controversy involved in the present case lies in a narrow compass. The
petitioner assailed the order dated 06.11.2019, whereby penalty has been imposed
solely on the ground that the Excise Verification Certificates (EVCs) pertaining to
the export consignments were not submitted within the period prescribed under
Rule 13 of the Madhya Pradesh Foreign Liquor Rules, 1996.
From the record, it is not in dispute that the petitioner had exported the
consignments under valid export permits and the corresponding Excise
Verification Certificates were subsequently produced before the Excise
Department. There is no allegation in the impugned order that the exported liquor
had not reached its destination; any consignment had been diverted or misused, or
the petitioner had caused any loss to the State exchequer. The penalty has been
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imposed solely on account of delayed submission of the Excise Verification

Certificates.
The object behind requiring production of the Excise Verification Certificate
is to establish that the exported liquor has actually reached the destination State.
Once such verification is ultimately furnished and the factum of export stands duly
established, delayed production of the certificate by itself cannot defeat the
substantive compliance with the statutory requirement. The issuance of the Excise
Verification Certificate is dependent upon the authorities of the importing State,
over whom the exporter has no control. Consequently, delay attributable to such
authorities cannot automatically expose the exporter to penal consequences.
The aforesaid principle stands fortified by the decision of the Karnataka
High Court in Bacardi India Pvt. Ltd. v. State of Karnataka & Others ( supra),
wherein, after relying upon the judgment of the Kerala High Court in the matter of
State of Kerala vs. Mc. Dowell & Co. Ltd., 1988 SCC (Ker.) 381, it was held that
the provision prescribing the period for production of the verification certificate is
directory and not mandatory, since strict enforcement of such requirement would
lead to unjust consequences where the exporter has no control over the issuance of
the certificate. It was further observed that where the export itself is duly
established, delayed submission of the verification certificate cannot invalidate the
transaction or justify penal action.
This Court finds the aforesaid reasoning to be persuasive. The purpose of
Rule 13 is to ensure verification of the export transaction and not to penalise an
exporter for circumstances beyond its control. Procedural prescriptions intended to
facilitate verification cannot be construed in a manner that defeats substantive
justice when the statutory object has otherwise been fulfilled.
Apart from the above, this Court also finds considerable substance in the
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petitioner's contention regarding violation of the principles of natural justice, as the

impugned order has admittedly been passed without issuance of any show cause
notice and without affording the petitioner an opportunity of hearing. There is
nothing on record to indicate that any adjudication was undertaken by the
competent authority to ascertain whether the delay was attributable to the
petitioner or whether any breach warranting imposition of penalty had in fact been
committed.
The Supreme Court in State of Bihar v. Industrial Corporation Pvt. Ltd.,
(2003) 11 SCC 465, has categorically held that before creating a demand of
penalty, there must be an adjudication regarding the alleged breach and the
affected party must be afforded an opportunity of hearing. The Apex Court further
held that statutory authorities cannot mechanically impose penalty merely on the
basis of an audit report and must independently examine whether any statutory
breach has actually occurred.
In the present case, the impugned order itself indicates that the demand has
been raised on the basis of an audit objection. There is nothing to demonstrate that
the competent authority independently examined the matter or recorded any
finding regarding misuse of export permits, diversion of liquor, or any loss caused
to the State. The impugned action, therefore, suffers from non-application of mind
and violation of the principles of natural justice.
It is a settled principle of law that unless a statute expressly provides
otherwise, procedural requirements are ordinarily directory when strict compliance
would lead to arbitrary or unjust consequences without advancing the legislative
object. Rule 13 is intended to ensure verification of exports and not to create a
source of revenue by imposing penalties despite the fact that the exports have been
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duly verified. To construe the prescribed period as mandatory would result in

penalising an exporter for delays attributable to authorities over whom it has no
control, a consequence which could never have been intended by the rule-making
authority.
Accordingly, this Court is of the considered opinion that the requirement
regarding submission of the Excise Verification Certificate within the prescribed
period under Rule 13 of the Madhya Pradesh Foreign Liquor Rules, 1996 is
directory in nature. Once the export is duly established by production of the
verification certificate and there is no allegation of diversion, misuse or evasion of
duty, delayed submission of the certificate, by itself, cannot furnish a valid basis
for levy of penalty.
Consequently, the impugned order dated 06.11.2019 cannot be sustained in
law and is hereby quashed. The writ petition is, accordingly, allowed. The order
dated 06.11.2019 passed by respondent No. 3 imposing penalty upon the
petitioner is hereby quashed. It is declared that the stipulation under Rule 13 of the
Madhya Pradesh Foreign Liquor Rules, 1996 prescribing the period for
submission of the Excise Verification Certificate is directory and not mandatory,
and mere delayed submission of the certificate, in the absence of any allegation of
diversion, misuse, or loss to the State, shall not, by itself, attract penal
consequences.
No order as to costs.
(MILIND RAMESH PHADKE)
JUDGE
pwn*

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Signed by: PAWAN KUMAR
Signing time: 7/27/2026
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