Excise inspections without a police officer of the required rank are invalid, Himachal Pradesh High Court rules, restoring distillery’s licences

The petitioner held a BWH-2 bottling-plant licence and subsidiary L-13C, L-15 and L-16 licences, renewed through 2024–25, and applied for renewal for 2025–26.

On 2 June 2025, a departmental team inspected the petitioner’s premises and reported alleged stock discrepancies and other irregularities.

The team had been constituted by an order dated 31 May 2025; its listed members included excise officials but no police officer of the rank required by the applicable notification.

Following a show-cause process, the Financial Commissioner (Excise) cancelled the petitioner’s licences by order dated 14 July 2025.

The petitioner challenged that order under Article 226, including on the ground that the inspection team did not comply with the statutory composition requirements.

Whether the inspection conducted under Section 8 of the Himachal Pradesh Excise Act, 2011, was invalid because the inspection team was not constituted in accordance with Section 6 and the notification dated 26 April 2025.

Whether the cancellation order and other consequential action based on that inspection could stand if the inspection was invalid.

Sections 6 and 8 of the Himachal Pradesh Excise Act, 2011, as amended, and the notification dated 26 April 2025 governed the composition and conduct of inspections.

The notification required the Section 8 power to be exercised by an officer specified under Section 6(1)(ii), accompanied by a State Taxes and Excise officer not below the rank of Assistant State Taxes and Excise Officer having jurisdiction and a police officer not below the rank of Deputy Superintendent of Police having jurisdiction.

The court applied the principle that statutory power must be exercised in the prescribed manner, as stated in Nazir Ahmad v. King Emperor, AIR 1936 PC 253, and relied on the interpretation adopted in M/s Tiloksons Brewery & Distillery v. State of Himachal Pradesh & Ors.

It held that compliance with the prescribed team composition was not a dispensable procedural formality but a material requirement.

The respondents admitted that the inspection was conducted under Section 8.

Although the team included departmental officers, its listed composition did not include a police officer of the rank required by the notification; the inspection report also did not record the participation of such an officer.

The court held that this omission defeated the statutory purpose of involving officers from other departments to ensure fairness and protect licence holders, and could not be treated as a mere procedural lapse.

It therefore found the inspection invalid and treated the notice and cancellation order founded on that inspection as consequential actions without a valid basis.

The court did not decide the petitioner’s other grounds, including its challenge to the fairness of the adjudication, leaving them open.

The order dated 14 July 2025 cancelling the petitioner’s licences was quashed and set aside.

The respondents were directed to renew the petitioner’s BWH-2 licence for 2026–27 and restore its L-13C, L-15 and L-16 licences, subject to the petitioner fulfilling the applicable conditions.

Any licence fee deposited for 2025–26 was to be adjusted towards the 2026–27 licence fee.