Full Judgment Text
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PETITIONER:
KARNAL DISTILLERY CO. LTD.
Vs.
RESPONDENT:
STATE OF HARYANA AND ORS.
DATE OF JUDGMENT:
16/10/1969
BENCH:
ACT:
Punjab Excise Act 1 of 1914-Cancellation or suspension under
s. 36(c) of licence granted under s. 21-Revoking or
foregoing cancellation of licence on payment of penalty
under s. 80(2)-Provision whether authorises cancellation of
licence subject to payment of penalty.
HEADNOTE:
The appellant company ran a distillery at Karnal under a
licence in form D-2 granted to it under s. 21 of the Punjab
Excise Act, 1914. The excise act Taxation Commissioner gave
certain directions to the company in regard to storage of
molasses purporting to be directions given under R. of the
Punjab Distillery Rules 1962- made Linder s. 59 of the
aforesaid Act. Section 36(c) of the Act provided that the
Commissioner could cancel or revoke a licence in case of
breach of its terms by the licencee. Under s. 80(2) of the
Act, however, the cancellation or suspension of any licence
permit or pass under s. 36 "may be foregone or revoked" at
the discretion of the authority concerned on payment of such
penalty as the authority may fix. In view of the failure of
the appellant company to comply with the directions
aforementioned given to it by the commissioner the latter on
June 5, 1963 passed an order holding that the company was
guilty of violation of condition 5 of its licence and the
licence was therefore liable to cancellation under s. 36(c)
of the Act. The order however purported to impose a penalty
of Rs. 500 under section 80(2) of the Act instead of
cancellation of the license. The company filed a writ
petition in the High Court. On merits the petition was
dismissed but the High Court observed that the penalty could
not be recovered is an arrears of land revenue and the only
action that could be, taken on failure to pay the penalty
was the cancellation of the licence. On October 16. 1964
the Commissioner sent a notice to the company informing it
that by reason of the company’s default in not paying the
penalty within the period fixed by the order dated June 5.
1963 its licence had to be cancelled in terms of the said
order. However the Commissioner stayed his hands in view of
an application for special leave to appeal to this Court
filed by the company before the High Court. The petition
was dismissed. Thereafter the Commissioner by order dated
December 5, 1967 passed an order canceling the distillery
licence. The appellant made another representation which
was rejected by the Commissioner on December 28, 1967.
Against these orders the company filed a writ petition in
the High Court but the Single Judge as well as the Division
Bench decided against it. The company by special leave
appealed to this Court. Allowing the appeal,
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HELD : Assuming that R. 37 permitted the Commissioner to
give to the appellant company a direction about storage of
molasses etc. any violation of that direction could be met
with an order for cancellation or suspension of the licence
under s. 36 of the Act. Having passed such an order the
Commissioner could under s. 80(2) revoke or forego the said
cancellation if penalty was paid. The word revocation is
only apposite when it is intended to repeal, annul or
withdraw some order which had already become effective. To
"forego" according to the Shorter Oxford Dictionary means"
to go past, to neglect, slight, to let go,
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give up etc." Foregoing, cancellation or suspension
therefore would mean ,giving up or undoing the effect of the
cancellation. [866 H-867 C]
Section 80(2) does not authorise the Commissioner to make a
conditional order in the form in which he purported to do by
his order of June 5, 1963. There was no cancellation of
licence by that order the Commissioner merely intimated the
appellant that its licence had become liable to cancellation
or suspension but instead of cancelling the licence he was
imposing a penalty of Rs. 500 to be paid within a fortnight
failing which action for cancellation would be taken under
s. 36(c). The Commissioner’s show cause notice dated
October 16. 1964 proceeded on the basis that as the penalty
had not been paid within the period fixed, the licence had
to be cancelled in terms of the order of June 5, 1963.
Section 36 of the Act does not permit the taking of such a
course. The grounds for cancellation or suspension of the
licence are specified in sub-cls. (a) to (g) of the section
and default in payment of penalty levied under the Act does
not find a place therein. The imposition of a penalty by
way of threat of cancellation of licence was also not
permissible under the Act. [867 C-F]
The contention that s. 80(2) permitted the making of an
order directing payment of fine in lieu of cancellation and
making the cancellation effective in default of payment of
fine, cannot be accepted. [868 A]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1256 of
1968.
Appeal by special leave from the order dated March 25, 1968
of the Punjab and Haryana High Court in Letters Patent
Appeal No. 168 of 1968.
H. L. Sibal, B. N. Khanna, S. Harbans Singh, B. Datta, D.
N. Mishra and J. B. Dadachanji, for the appellant.
Niren De, Attorney-General, V. C. Mahajan and R. N. Sach-
they, for the respondents.
The Judgment of the Court was delivered by
Mitter, J. This is an appeal by special leave from an order
dated March 25, 1968 of the High Court of Punjab and Haryana
at Chandigarh passed in Letters Patent Appeal No. 168 of
1968 where by the High Court dismissed in limine the said
appeal filed by the appellant against the order of March 18,
1968 of a single Judge of the said court in Civil Writ No.
39 of 1968. The appellant, the petitioner before the High
Court, prayed for quashing of two orders of the Excise and
Taxation Commissioner dated 18th December 1967 and 28th
December, 1967.
The facts giving rise to the Writ Petition are as follows.
The appellant-company runs a distillery at Karnal and was
engaged. in the manufacture of liquor from molasses under a
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licence in form D 2 granted under section 21 of the Punjab
Excise Act, 1914 by the Financial Commissioner of the State.
The said
863
licence was granted on certain conditions incorporated
therein the relevant ones being
1. The licensee shall observe the
provisions of the Punjab Excise Act 1 of 1914
and of all rules thereunder, . . . .
5. He shall comply ’With all directions of
the Financial Commissioner regarding the
character or purity of the liquor to be
manufactured, the stock of spirit or material
to be maintained, and all other matters in
which compliance is prescribed by rules made
under the Punjab Excise Act, 1 of 1914.
7. If the licensee infringes or causes or
permits any person to infringe any of the
conditions of this licence, the Financial
Commissioner may forthwith revoke and
determine the licence and forfeit to
Government the whole or any part of any
deposit made by the licensee under rule 4(a)
of the Distillery Rules . . . .
8. The licensee shall pay regularly and by
due date all payments which may become due to
Government and in default thereof the
Financial Commissioner may forfeit to
Government the whole or any part of any
security furnished by him under rule 6 of the
rules...........
By a letter dated April 11, 1962 the Excise and Taxation
Commissioner of the State (hereinafter referred to as the
’Commissioner’) directed the appellant to increase the
covered storage capacity of molasses by about 15 per cent.
The appellant represented that there was no space available
in the distillery for the purpose whereupon the Commissioner
required the appellant to cover the existing storage tanks.
The Commissioner gave a direction to the appellant that it
should at least arrange to cover its uncovered molasses tank
of the capacity of 30,000 maunds by October 31, 1962. By a
letter dated February 4, 1963 the appellant was further
informed that in case of their failure to comply with the
above requirement the department would have no option but to
proceeding against them under condition 5 of the distillery
licence. By letter dated February 9, 1963 the appellant
desired to have a discussion of the matter with the
Commissioner. Thereafter more than one date was fixed by
the Commissioner for the purpose but it appears that the
dates fixed were Pot suitable to the representatives of the
appellant. The last meeting fixed was for the April 19,
1963. The appellant wanted to change the date to April 21,
1963 which was not suitable to the Commissioner. Taking the
view that the appellant wanted to side-track
864
the issue the Commissioner made an order on June 5, 1963 ,
the relevant portion of which reads as follows :-
"They (the appellant) are thus guilty of
violation of condition No. 5 of Distillery
Licence held by them in form D-2. The
management of the distillery have thus
rendered their licence in form D-2 granted in
favour of the karnal Distillery Co. Ltd.,
Karnal, liable to cancellation or suspension
under sec. 36(c) of the Punjab Excise Act (1
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of 1914). However, instead of cancelling the
licence, 1, in exercise of powers under sec-
tion 80(2) of the Act ibid, hereby impose a
penalty of Rs. 5001- on the management of the
said distillery. The amount of penalty should
be deposited by the management in the
Government Treasury, Karnal, within a
fortnight of the receipt of this order failing
which action for cancellation of Distillery
licence will be taken under S. 36(c) idid."
The appellant filed a Writ Petition No. 315 of
1964 in the High Court for quashing of the
said order inter alia on the round that no
sufficient opportunity was given to it to
represent its case before the making of the
said order and that the Commissioner had no
power to direct the appellant to cover its
uncovered storage tank. Both these contentions
were turned down by a ’Division Bench of
the High Court but the learned Judge upheld
the appellant’s contention that the
Commissioner was not entitled to recover the
amount of penalty as arrears of land revenue
observing in this connection that :
"It would thus follow from the order that in
case the amount of penalty was not deposited
within the prescribed time, the only action,
which would be taken by the authority
concerned, was the cancellation of the
distillery licence."
In the result although the Writ Petition was
dismissed the High Court quashed the
proceedings which were being taken by the
excise authorities for recovery of the amount
of penalty is arrears of land revenue. The
order of the High Court was passed on 20th
August, 1964. The Commissioner followed this
up by a notice dated October 16, 1964. After
referring to the earlier :order of June 5,
1963 and the above order of the High Court the
Commissioner stated
"Since you have not paid the amount of penalty
within the period fixed your licence has to be
cancelled in terms of the above cited order of
the Excise and Taxation Commissioner.
865
In case you have anything to say regarding the
above action you may submit your
representation in writing within seven days of
the receipt of this notice."
The appellant replied by letter dated October 23, 1964
taking exception to the proposed action and complaining that
the notice to cancel the appellant’s licence for the trivial
amount of Rs. 500/was mala fide and made out of personal
animosity of the Financial Commissioner. It was further
stated that the appellant was arranging to file an appeal in
the Supreme Court against the order of the High Court of
Punjab dated 20th August 1964 and a request was made to the
Commissioner to stay his hands pending disposal of the same.
The appellant enclosed a cheque for Rs. 5001- with the reply
without prejudice to its rights.
Nothing appears to have been done by the Commissioner for a
long time thereafter. The cheque was not uncashed but sent
back to the appellant on July 13, 1965. Another cheque for
the amount was sent to the Commissioner in December 1966
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which too was not encashed. Apparently the Commissioner
stayed his hands because of the pendency of the application
for leave to appeal to this Court which was ultimately
rejected. He gave a hearing to the appellant on June 5,
1967 whereafter the matter was adjourned from time to time.
After hearing the parties finally on December 5, 1967 he
passed an order cancelling the distillery licence turning
down the contentions urged on behalf of the appellant. The
appellant made another representation to the Commissioner on
December 27, 1967 and this was rejected by an order dated
December 28, 1967. Both these orders show that the
Commissioner took the view that the period of 15 days
mentioned in the order of June 5, 1963 was a term of the
order and failure to comply strictly therewith entailed the
penal consequences directly flowing therefrom. The
Commissioner was also of the view that the department could
not insist upon recovering the penalty and the only course
open was to consider whether or not the licence required to
be cancelled. As the appellant was found to have failed to
carry out the directions given under the Excise Act and the
rules, the only course open was to cancel the licence.
Mr. Sibbal learned advocate for the appellant raised various
contentions to show that the stand taken by the department
was not justified and that the licence of the appellant
could not be cancelled in the manner it was sought to be
done. In our view, it is not necessary to deal with all the
contentions raised. Under s. 20(2) of the punjab Excise
Act, 1914 no distillery or brewery can be constructed or
worked except under the authority ,and
866
subject to the terms and conditions of a licence granted in
that behalf by the Financial Commissioner under S. 21.
Under the latter section the Financial Commissioner, subject
to such restrictions and conditions as the State Government
may impose, may make rules regarding the granting of licence
for distilleries, stills or breweries, the security to be
deposited by the licensee of a distillery or brewery etc.
Section 36 provides that
"Subject to such restrictions as the State
Government may prescribe, the authority
granting any licence, permit or pass under
this Act may cancel or suspend it
(a)and (b)
(c) in the event of any breach by the holder
of such licence, permit or pass or by his
servants, or by any one acting on his behalf
with his express or implied permission, of
any, of the terms or conditions of such
licence, permit or pass;
Section 80 (1) gives the Collector the power
to accept from any person reasonably suspected
of having committed an offence punishable
under s. 65 or s. 68 of the Act a sum of money
by way of composition for such offence. Sub-
s. (2) of the section lays down :
"The cancellation or suspension of any
licence, permit or pass under section 36(a),
(b) or (c) of this Act may beforegone or
revoked by and at the sole discretion of the
authority having power to cancel or suspend it
on payment by the holder of such licence,
permit or pass of such penalty as such
authority may fix."
The Commissioner promulgated rules known as
The Punjab Distillery Rules, 1932 under S. 59
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of the Act. Rule 5 thereof shows that the
licence to run a distillery must be in form D-
2. Rule 37 lays down that :
"The licensee shall have always in stock in a
gur, molasses or mahua store to be provided by
him and approved by the Financial
Commissioner, a quantity of gur, molasses or
mahua sufficient for the preparation of wash
for the full working of all his stills,
calculated upon the data set forth. . . .
Assuming that this rule permitted the Commissioner to give a
direction for increasing the covered storage capacity of
molasses
867
or to cover its uncovered molasses tank any violation of
that direction could be met with an order for cancellation
or suspension of the licence under s. 36 of the Act.
Having- passed such an order of cancellation or suspension
it would be open to the Commissioner or the authority
concerned to impose a penalty for the infraction complained
of and give the distillery a notice to the effect that the
suspension or the cancellation would be revoked or foregone
if the penalty was paid. The word revocation is only
apposite when it is intended to repeal, annul or withdraw
some order which has already become effective, "To forego"
according to Shorter Oxford Dictionary means "to go past to
neglect, slight, to let go, give up etc." Fore going
cancellation or suspension therefore would mean giving up
or undoing ii-he effect of cancellation. In our opinion s..
80(2) does not authorise the Commissioner to make a
conditional order ’in form in which he purported to do by
his order of June 5, 1963. there was no cancellation of
licence by that order. The Commissioner merely intimated
the appellant that its licence had become liable to
cancellation or suspension but instead of cancelling the
licence he was imposing a penalty of Rs. 500/- to be paid
within a fortnight failing which action for cancellation
would be taken under S. 36(c). The Commissioner’s show
cause notice dated October 16, 1964 proceeds on the basis
that, as the penalty had not been laid within e period
fixed, the licence had to be cancelled in terms of the order
of June 5, 1963. Section 36 of the Act does not permit the
taking of such a course. The grounds for cancellation or
suspension of the licence are specified in sub-cls. (a) to
(g) of the section and default in payment of penalty levied
under the Act does not find a place therein. The imposition
of a penalty by way of threat of cancellation of licence was
also not permissible under the Act.
No doubt in his orders of December 18, 1967 and December 28,
1967 the Commissioner had relied on the fact that the
appellant had failed to comply with the direction to cover
the uncovered molasses storage tank. But this default was
not the subject matter of the show cause notice. If the
Commissioner had issued a notice to the effect that in spite
of opportunities given to the appellant no attempt had been
made to cover the storage tank and that the same called for
a cancellation of the licence, there might be justification
for the course taken. In our view the Commissioner was not
entitled to cancel the licence because of the default in the
payment of penalty.
The learned Attorney General contended that tinder s. 80 of
the Act it was not obligatory on the Commissioner first to
pass an order of cancellation of licence for breach of any
of its con-
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868
ditions and then revoke it on payment of a penalty.
According to him the section permitted the making of an
order directing payment of fine in lieu of cancellation and
making the cancellation effective in default of payment of
fine. We do not think the section bears that
interpretation.
In the result we hold that the orders of cancellation of the
licence dated December 18, 1967 and December 28, 1967 were
not authorised by law. The appeal must therefore be allowed
and the orders of December 1967 be quashed. But on the
facts of this case, we make no order as to costs.
Appeal allowed.
R.K.P.S.
869