Madhya Pradesh High Court
M/S Som Distilleries Pvt.Ltd. vs The State Of Madhya Pradesh on 14 May, 2025
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NEUTRAL CITATION NO. 2025:MPHC-JBP:23064
2025:MPHC
W. P. No. 9443/2006
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE SURESH KUMAR KAIT,
CHIEF JUSTICE
&
HON'BLE SHRI JUSTICE VIVEK JAIN
WRIT PETITION No. 9443 of 2006
M/S SOM DISTILLERIES PVT. LTD.
Versus
STATE OF M.P. AND OTHERS
Appearance:
Shri Sanjay Agrawal - Senior Advocate with Shri Rahul Gupta-
Gupta
Advocate for petitioner.
Shri Bramhadatt Singh - Deputy Advocate General for
respondents/State.
Reserved on - 16.04.2025
Pronounced on - 14.05.2025
ORDER
Per: Suresh Kumar Kait, Kait Chief Justice
1. The present Writ Petition under Article 226 of the Constitution of India has been preferred by the Petitioner- Som Distilleries Private Limited seeking quashing of Order dated 01.05.2006 passed by Respondents No.2- The Principal Secretary, Commercial Taxation Department of Government of Madhya Pradesh and the Communication dated 06.05.2006.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..2..
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2. The back-forth forth of the case, as has been spelt out in the present Petition,, is that for supply of country liquor in various areas, a tender was issued and published by the Excise Commissioner in official gazette dated 02.04.2005, which broadly indicated the scheme of supply.The Petitioner was found quoting most ccompetitive ompetitive rates not only as compared to the previous years but also of the same years sanctioned to other suppliers. The license of supply of country liquor in 7 supply areas in 12 districts was awarded to the Petitioner.
3. The Petitioner after grant of licence and commencement of the excise year started making supplies in the right earnest and in fact every month supplied liquor to different different supply areas not only conforming confo to and fulfilling the demand of the retail vendors but more than the tendered quantity from the warehouses.
4. However, the he Excise Commissioner, Gwalior MP sent a Show Cause Notice dated 10.11.2004 directing the Petitioner to show cause as to why the supplies are not being made properly and why the supply areas may not be detached from the its distillery and be attached with other distilleries at the cost of the Petitioner.
5. According to the Petitioner, the Show Cause notice dated 10.11.2004 (Annexure P-11) P issued by the Respondents was based on incorrect and baseless facts, alleging supplies are not being made properly, and as such, why the supply area of the Petitioner be not attached, to which the Petitioner submitted a detailed reply, dated 18.11.2004 (Annexure P/13).
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..3..
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6. The Petitioner ner has averred that it had made continuous and uninterrupted supply as per demand from the warehouses and on account of which an amount of approximately Rs.729 lakhs became overdue for payment, but the same was arbitrarily and malafidely withheld by the Respondents,, which was in breach of the terms of the license. The payment was not released despite repeated requests.
7. It is submitted that the Petitioner supplied liquor to different supply areas, not only confirming to and fulfilling the demand of the retail ret vendors, but more than the tendered quantity from the warehouses. There was no inadequate or failure of supply to the retail vendors. But the Respondents,, without any reason or authority, withheld the payment of the cost price bills, sealing and bottle charges, which were due to the Petitioner and were required to be paid regularly every month.
8. It is further submitted that pursuant to issuance of Show Cause Notice dated 10.11.2004 the Excise Commissioner did not pass any orders, which leads to the conc conclusion lusion that the allegations were wholly incorrect and baseless. In the meanwhile, the cost price of sealing and bottling charges accumulated and by the end of month of March, 2005, the total outstanding amount due and payable to the Petitioner reached up to 7.29 crores.
9. The Excise Commissioner issued Order dated 03.01.2005 and in anticipation of recovery from the Petitioner,, a sum of Rs.14 lakhs was deducted from the outstanding amount due to the Petitioner.. On account of illegal withholding of the amount due, the Petitioner,, approached the Board of Revenue, which upheld the right of the Petitioner to receive the Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..4..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 payments regularly and vide dated 29.12.2004 issued Orders for release and payment of its dues.
10. However, the Excise Commissioner issued Orders dated 06.01.2005 and 07.01.2005 directing the Collectors that they all must impose full penalty against the Petitioner and the same was being done even without issuance of show cause notice to the Petitioner.
11. The Petitioner challenged the orders dated 06.01.2005 and 07.01.2005 before Board of Revenue, operation whereof was stayed during the proceedings. However, by final order dated 18.5.2005 the Revision Petitionss were disposed of remanding them back to the Excise commissioner for fresh decisions.
12. Thereafter, the Excise Commissioner, without determination of the fact if there was any failure of supply on the part of Petitioner to fulfill the demand, started making reckless and arbitrary purchases without any a justification or necessity at very high and exorbitant rates. The Excise Commissioner started making huge purchases of quantity of liquor from only a few favoured distillers and suppliers and sanctioned them exorbitantly high rate of supplies. The names of the said suppliers are Gwalior Distilleries Ltd., Great Galleon Galleon Ltd. and Agarwal Distillery.
13. It is submitted that the Petitioner had applied for issuance of "No Dues and Satisfactory Performance Certificate" to the Excise Commissioner for participation in the tender for the excise Year 2005- 2 2006, but the Commissioner deliberately deliberately refused to issue the same so that Petitioner remains precluded from participating in the tender. Therefore, the Petitioner preferred W.P. No. 882/2005 before this court for Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..5..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 appropriate relief and directions. The Petitioner also filed W.P. 1380/2005 against the Excise Commissioner and his Department challenging the illegal and arbitrary recoveries and for withholding the payments due to it.
14. The Petitioner has contended that in the counter affidavit filed in the said proceedings, dings, the Department admitted that a sum of Rs.2.45 crores was due to the Petitioner.. The main defence taken by the Respondents in those proceedings was that the Petitioner had failed to supply liquor as per the obligations and therefore, the Excise Commissioner ssioner and his department was justified in making purchases from open market at the rates sanctioned. This Court, by judgment dated 26.9.2005 decided the aforesaid two Petitionss thereby quashing the impugned recovery and declared that the action of the Excise Ex Commissioner and his department was arbitrary, unjust, illegal and unreasonable and granted liberty to the Petitioner to make a detailed Representation, supported by the facts to be adjudicated by the Principal Secretary of the Government.
15. On 24.10.2005 005 the Petitioner applied to the Excise Commissioner for supply of basic information of the facts on the basis of which it was accused of being in default. On the same day, Petitioner received a letter dated 24.10.2005 from the Principal Secretary to subm submit it a Representation within 15 days or the matter would be decided ex parte.
16. The Petitioner submitted mitted a detailed Representation dated 14.11.2005 submitting that the same shall be supplemented once complete information is received from the Excise commissioner.
commissio This continued with chain of communications dated 18.11.2005, 21.12.2005, Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..6..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 22.11.2005 25.11.2005 to the Principal Secretary stating that it has already applied to the Excise Commissioner for information and once the information is received, the same shall shall be supplemented in the representation.
17. Thereafter by another communication dated 15.12.2005 the Petitioner explained the Principal Secretary why the information was required for the purpose of making Representation. Also, by letter dated 28.01.2006 the Petitioner stated that he was suffering hardships as an amount of Rs. 729 lakhs was withheld by the Respondents.
Respondents On 31.01.2006, a letter was received by the Petitioner from Principal Secretary to make a representation by 10.02.2006 or else the matter shall be decided ex parte.
18. Accordingly, the t Petitioner made another representation dated 10.02.2006 reserving its right to elaborate once the desired information was received ived from the Excise Department.
epartment. However, the department did not supply the required information. Instead by Letter dated 16/20.02.2006, the Petitioner was informed that since it has filed Petitions before the High Court, it must be in possession of all th thee information and nothing is required to be supplied.
19. However, the Principal Secretary issued an internal Memo dated 16.02.2006 seeking information on the basis of letters of the Petitioner. On the basis of the said Memo, the Excise Commissioner, in turn issued Memo dated 21.02.2006 to the Assistant Commissioner to make available the required information based on the letters of request by the Petitioner in the prescribed format.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..7..
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20. In the meanwhile, the Petitioner approached this Court and vide order dated 09.03.2006, .2006, the Petition preferred by the Petitioner was dismissed, observing that even if the final order is passed, the Petitioner shall have liberty to raise contentions and grounds.
21. The Petitioner preferred Special Leave Petition against the order, which was dismissed by the Supreme Court by order dated 10.4.2006. The Petitioner thereafter received a notice dated 10.3.2006 from Excise Commissioner directing to appear for hearing on 25.03.2006 However, the representative appearing on behalf of the Petitioner was never called to make any statement. When the Representative tried to move an application, the Excise Commissioner stopped him on the pretext that it would delay the matter. A voluminous record was submitted by the Excise Commissioner and his su subordinate bordinate officials, about which Petitioner's 's representative had no knowledge.
22. By letter, dated 31.03.2006, the Petitioner again requested Excise Commissioner to provide the records and that Petitioner be allowed an opportunity to see the records but no documents were given.
23. The Petitioner has alleged that on 25.03.2006 and also on 15.4.2006, the Excise Commissioner called a meeting and also such a meeting had taken place on 15.4.2006 with direction to submit information in certain formats to the Excise Commissioner and the Principal Secretary and these meetings took place behind the back of the Petitioner,, which is in violation of principles of natural justice.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..8..
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24. Thereafter, the Respondents served upon the Petitioner a copy of impugned order dated 01.05.2006 which, according to it is absolutely without jurisdiction, void and arbitrary and deserves to be quashed.
25. The grounds on which the impugned order dated 01.05.2006, is sought to be quashed are th that at the proceedings conducted by the Excise Commissioner are in violation of principles of natural justice and the order has been passed behind the back of the Petitioner.. The Petitioner has submitted that the impugned order is non non-est, est, as it was given with without issuance of Show Cause Notice and supplying of relevant information and by suppressing of material facts by the Excise Commissioner.
26. The Petitioner has alleged that it has been denied the opportunity of knowing and meeting the case of the Respondents,, which shows utter non-application application of mind and is unjustified and unreasonable. The Petitioner has also submitted that the proceedings conducted before the Principal Secretary, smack of bias, ma mala la fide and arbitrariness. The Principal Secretary ecretary has failed to perform its duty of adjudicator, as it was supposed to issue Show Cause Notice to the Petitioner and to provide all factual details and opportunity of hearing.
27. The Principal Secretary did not consider that the issue of imposition of penalty is pending before the Excise Commissioner and by passing such an order, it has taken away the right to appeal from the Petitioner,, which is its statutory right. The Petitioner has alleged that the letter dated 16/20.02.2006, refusing to supply the information to the Petitioner for making a representation based on facts and figures, shows that the proceedings and the conduct of Respondents was arbitrary and mala fide. Non-supply supply of important and relevant information has resulted Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..9..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 in serious prejudice to the Petitioner, as it turned handicapped to make effective representation.
28. The Petitioner has submitted that the Annexure-4 attached to the impugned order is the statement regarding the payments due and recoverable from the Petitioner.. However, it does not make mention of payments of IMFFL, as well as the cost price bills submitted by the Petitioner,, and therefore the figures relied upon by the Principal Secretary, are not authentic and trustworthy. It is submitted that the figures are not only inaccurate, baseless and misleading, but they suffer from patent errors, improbabilities and distortion and cannot be accepted as true.
29. The Petitioner has further submitted that it was expected to maintain a minimum stock of 14 crore proof litre and the shortfall was to the extent nt of 10 crore proof litre for the seven supply areas. However, the total consumption of the entire state of Madha Pradesh is only 4.5 crore proof litres and for the areas allotted to the Petitioner,, the consumption is only 1.03 Proof litres. This shows th that at the figures are not only arbitrary and mala fide, but have been whimsically accepted by the Principal Secretary without any application of mind.
30. The Petitioner has submitted that the purchase of liquor from other vendors was in violation of the Rul Rulee 4(3) r/w Rule 5(4) (b) of the MP Country Spirit Rules, 1995.
31. If there was any irregularity and interrupted supply, the procedure prescribed under Rule 4(3) could be followed where under only scheduled and sanctioned rates under license could have been paid.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..10..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 However, the procedure was not adopted and no open tender with wide publicity and opportunity nity to others were ever floated or issued. Except the above noted distillers or suppliers, no other were asked or given opportunity to supply. The whole object was only to favour those four distillers to whom very high and exorbitant rates were sanctioned by the Excise Commissioner, which shows deep rooted conspiracy. It is also submitted that the Principal Secretary has failed to consider that in terms of Rule 4(3), the distillers and suppliers already holding license for supply were not asked to supply on o their scheduled rates.
32. Also, as per Rule 5(4) (a) in a situation where there is occasional failure to maintain stock, then only the provision of Rule 5(4) (b) can be put into service. Thus, the authority of Respondentshave violated the provisions of statutory rules by arbitrarily invoking Rule 5(4) (a) inasmuch as the Excise Commissioner, after having given the Show Cause Notice, did not pursue the matter under the provisions of Rule 5(4)
(b). The Respondents have assumed for themselves without any material m on record that there was failure on the part of the Petitioner to supply or maintain the stock, which is not established.
33. It is submitted that the Petitioner is no doubt under an obligation to supply the required quantity of liquor. But the State also had a reciprocal obligation to make timely payments to the Petitioner for the supplies made by it. Withholding the amount due to the Petitioner against the supply and sale of goods, is a fundamental breach of the term of the contract, which resulted lted in total frustration of the contract due to default attributable to the Respondents Respondents.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..11..
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34. During the course of hearing, learned counsel appearing on behalf of the Petitioner had vehemently submitted that the Principal Secretary ought to have considere considered d the matter regarding imposition of penalty, which was pending before Excise Commissioner, and by passing an order in respect thereof, it has taken away the statutory right to appeal from the Petitioner. It was submitted that impugned order on the part of Respondents in not supplying the relevant information, information is wholly in violation of the letter and spirit of judgment of this court dated 26.09.2005.
35. Accordingly, the the entire proceedings and conduct of the Respondents is prima facie illegal and arbitrary. It is well settled law that no penalty can be imposed without issuance of Show Cause Notice and affording an opportunity of hearing. But such a requirement of principles of natural justice has been ignored by the Respondents.. The re refusal of Principal Secretary to supply information requested by the Petitioner is unjustified, unjust, unreasonable and arbitrary, which deprived the Petitioner of a valuable right to make an effective representation and counter the allegations levelled by the Respondents.
36. Learned counsel for petitioner submitted that the impugned order erroneously justifies the basis of arithmetical calculation by working out difference in the total quantity of minimum stock in terms of Rule 44A to keep in warehouses and storage warehouses and the total quantity of spiritt and sealed bottles supplied in those warehouses by the Licensees. While this arithmetical calculation in itself is seriously disputed, however, it is not clear that there is anything on record to show that the Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..12..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 alleged shortfall has anything to do with the the demand itself and that there was actual demand in existence and the same was not fulfilled.
37. It is further submitted that Respondents No.2-
No.2 Excise Commissioner has committed gross illegality in not appreciating that no recovery can be made from the Petitioner because the Excise Commissioner himself did not follow the mandatory Rule 5(4) (b) read with Rule 4(3). It is also submitted that clause seven of the tender notice has been absolutely misinterpreted, and there is no basis to arrive at an imaginary ry figure of the tender quantity and the order passed by Respondents No.2 is in utter non-compliance non compliance and violation of the orders passed by this court on 26.09.2005.The findings returned by Respondents No.2 are perverse, without any evidence and contrary to the record and the Petitioner has prayed rayed that the the impugned order dated 01.05.2006 passed by Respondents No.2 be declared void and inoperative and also the impugned letter dated 6.5.2006 issued by Respondents No.3 be set aside.
38. To the contrary, the Respondents in their reply to the present Petition have submitted that the impugned orders passed by the State Government do not suffer from any legal infirmity or jurisdictional error warranting interference rference of the court. It is submitted sub that Petitioner cannot be permitted to assail the legality and constitutional validity of the provisions contained in the MP Country Spirit Rules 1995. It is submitted that Clause 15 of the tender notice dated 02.04.2004 published by the Respondents No.2 in the official gazette provided that the tenderer shall imply that he has read and understood the provisions of MP Excise Act Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..13..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 and Rules made there under. And thus, Petitioner was fully aware of the provisions contained in Rule 5(4) (b) and 12(2) of the Rules of 1995.
39. Despite knowledge of the aforesaid rules, the Petitioner submitted his tender and accepted the license issued to him and thereby it was bound by the provisions of estoppel or waiver by conduct.
40. It is submitted that in the earlier earlier round of litigations by filing WP No.1380/2005 and 882/2005, the Petitioner never questioned the validity of the Rules and now it cannot be permitted to raise such questions in subsequent proceedings.
41. It is submitted that Rule 4(4) (a) of the Rul Rules es of 1995 provide that the licensee shall maintain at each manufacturing warehouse, the minimum stock of bottled liquor and rectified spirit spirit, equivalent to average issue of five and seven days respectively, of the preceding month. That means to say that every very person holding license is required to maintain a minimum stock of bottled liquor and rectified spirit. Thus, Rule 5(4)(a) deals with non-compliance compliance of the provisions contained in Rule 4(4) (a),
(a) which hich provides that in case the licensee fails to supply spirit/ sealed bottle as required or to maintain minimum stock of spirit spirit/ sealed bottles as prescribed, or in the warehouse or in the area and if the genuine demand of the retail vendor cannot be fully made, the Assistant Commissioner Commissioner/the District Excise Officer fficer is authorized by the Excise Commissioner to purchase rectified spirit and/ or country spirit in sealed bottles at the prevailing market rate.
42. It is submitted on behalf of the Respondentss that MP Excise Act, 1915 is an Act of State Legislature regulating the import, export, Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..14..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 transport, manufacture, and sale or possession of intoxicated liquor and intoxicated drugs in the State of MP. Section 13 of the Act provides that no intoxicant shall be manufactured or collected or bottled for sale except under der the authority and subject to the terms and conditions of a license granted in that regard. Sub-section Sub section (3) of section 28 of the Act empowers the State Government to prescribe the rate of penalty, which may be imposed and recovered from a licensee for ccommitting ommitting breach of restrictions and conditions as may be prescribed under the Rules. As per the Scheme of Rules of 1995, the manufacturer and the wholesale licensee is required to store adequate quantity of rectified spirit sealed bottle from where it is supplied to retail licensee, holding licenses under rule 9 on payment of necessary excise duty and sealing charges in order to ensure uninterrupted supply of liquor.
43. In the present case, the Petitioner agreed to supply liquor at the rates, varying from Rs.0.24 to Rs.0.88 per proof litre, whereas excise duty at the relevant time was 105.00 per proof litter. The difference of the aforesaid amount was net revenue earning of the State Government. The aforesaid provision was made in order to ensure that no loss is caused to the revenue on account of any short supply of liquor. The aforesaid provision does not suffer from any arbitrariness as alleged by the Petitioner.
44. The State Government is competent to impose reasonable restriction and other conditi conditions ons for supply of liquor. No fault, therefore, can be found in the aforesaid provision. It was reiterated that the contention of Petitioner that the provisions contained in Rule 5(4)(a) empowers the competent authority to effect purchase at the current Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..15..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 market ket rate, infringes the Petitioner's exclusive right to manufacture /supply liquor is totally misconceived. Since the privilege to deal in liquor vests in the State Government, it is fully competent to arrange for supply of liquor from alternative sources in the event of failure of licensee to maintain minimum stock of liquor in the warehouse. The said power has been conferred in order to meet certain contingency which may arise on account of failure on certain occasions of the licensee to maintain minimum stock of liquor.
45. It is submitted by Respondents that in order to ensure that the provisions of Rule 4(4) (a) are not violated, it becomes necessary to make provisions empowering the Assistant commissioner or the District Excise Officer to purchase rectified spirit sealed bottles from alternative sources source at the prevalent open market rate. In the event of licensee licensee's 's failure to supply the same, the provisions contained under Rule 5(4) (a) is consistent with the scheme of the Act and Rules framed frame there under.
Likewise, provision of Rule 12(2) has been made in order to penalize licensee for failure to maintain minimum stock of liquor in the warehouse as required under Rule 4(4) (a).
46. Also, Section 28(3) specifically empowers State Government to prescribe rate of penalty leviable and recoverable from licensee on account of breach of any of the terms and conditions of the license. Rule 12(2) merely prescribes rate of penalty.
47. The contention ontention of Petitioner that the provisions contained in Rule 5(4) (a) empowering the competent authority to effect purchase at the current market rate, infringes Petitioner's 's right to supply liquor, is totally misconceived. Since the privilege to deal in liquor, vests in State Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..16..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 Government, it is fully competent to arrange for supply of liquor from alternative source in the event of failure of licensee to maintain minimum stock. Such power can be exercised even without suspending or cancelling the license. IIt is submitted mitted that, in the present case, the Principal Secretary of Commercial Taxes Department of Central Government has passed the order in compliance of decisions by the Gwalior Bench of this Court in WP Nos.1380/2005;
1380/2005; 882/2005;
2888/2005 and 2887/2005.
2887/2005. The State Government has examined the legality and propriety of the action taken by the competent authority under Rule 5(4) (a) and in recovering amount of difference from the Petitioner,, as also the actions of the Department in imposing penalty under Rule 12(2) of the Act.
48. In the present case, Petitioner was required to maintain minimum stock of bottled liquor and rectified spirit equal to average issue of five and seven days respectively of the preceding month. The Petitioner, Petitioner in terms of conditions ons of the license, started supplying liquor in respective areas allotted to it and it was entitled to receive rates quoted by it for supply of liquor from the State Government, as also sealing charges from the retail license. Petitioner was timely paid in respect of the supplies made by it up to the month of August 2004 2004. On 9.8.2004 the Respondent No.3 received notice under section 226 (3) of the Income Tax Act from the Tax Recovery Officer Bhopal, whereby Respondent No.3 was directed to pay the Income Tax Department any amount due from the State Government to the Petitioner.. The aforesaid order of the Income Tax Department was binding on the Respondents,, and accordingly, the Respondents paid all amount due to the Petitioner.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..17..
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49. In compliance of the afore aforesaid order, Respondents No.3 issued directions to the concerned concern Assistant Commissioners/ District Excise Officers to not make any payment to the Petitioner without permission of Respondent No.3. And this makes clear that the amount due to the Petitioner wass not paid on account of the order passed by the Income Tax Department.
50. However, thereafter, the Income Tax Department, epartment, by its order dated 25.8.2004 suspended operation of its earlier order dated 09.08.2004 and the Respondent No.3 again issued instructions to the concerned officers to keep in abeyance its order dated 24.08.2004 8.2004 till further orders.
51. However, again, the Tax Recovery Officer Bh Bhopal pal issued order dated 07.10.2004 to comply its earlier order issued under Section Secti 226 (3) of the Income Tax Act and on the basis of this order, again, Respondent No.3, issued instructions, vide Memo dated 14.10.2004 to not make any payment to the Petitioner Petitioner.. It is submitted that during the period 24.8.2004 up to 17.11.2004, the payments payments could not be made on account of aforesaid orders of the Income Tax Department. In the meanwhile, the Petitioner started committing default in maintaining minimum stock of rectified/ spirit bottled liquor as required under the Rule 4(4) (a) and the Ware House Officers in the respective supply areas brought this information of shortfall in the stock to the notice of the Petitioner's Warehouse Manager from time to time. However, the stock was not maintained.
52. Failure on the part of Petitioner to maintain ain minimum stock was reported to the Assistant Commissioner /District Excise Officer by the respective Warehouse Officers. On receipt of information regarding non-
non Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..18..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 maintenance of the minimum stock, a Show Cause Notice dated 10.11.2004 was issued to the Petitioner to show cause as to why areas allotted to it be not detached and alternative arrangement be not made for supply of liquor in those areas.
53. The Petitioner submitted its reply on 18.11.2004 and Petitioner did not deny the fact that there was fai failure lure to maintain minimum stock of liquor. However, it tried to justify that rates quoted by it were extremely low and that it is suffering loss on account of unforeseen extremely difficult situation of non non-availability of raw material, etc.
54. On the basis of reply filed by the Petitioner and considered by Respondents No.3, the Show Cause notice was finally dropped by the Commissioner off Excise by its order dated 01.03.2006. Further action was not taken on the Show Cause Notice not on the ground that Petitioner's 's supply was found to be regular, but the same was taken, keeping in view market factors pointed out by the Petitioner.
55. Keeping in view the totality of circumstances, a necessity to procure liquor from alternative sources, on account of Petitioner's inability to maintain regular supply and stock in the warehouse, the Assistant Commissioner /District Excise Officer took decision to purchase liquor from other sources on current market rate. The purchases were not made to fill the shortf shortfall all in the stock required to be maintained under Rule 4(4) (a), but with a view to minimize the burden on the Petitioner to pay difference of price. All supplies were not made at one particular rate. Fresh tenders were invited from time to time and attempts attempt were made to procure liquor from the market at the best possible lowest price.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..19..
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56. The Respondents have ha contended that even though the purchase was made from the market, the sealing charges in respect of the said liquor was initially paid to the Petitioner by the retailers and the Petitioner,, thereby continued to derive profit by difference in the sealing charges fixed ed by the State S Government overnment and actual expenses incurred in carrying out aforesaid work.
57. Moreover, the purchases were made by the Respondents at rates varying from Rs.16.95 16.95 to Rs.24 24 per proof litter of rectified spirit and Rs.10.88 to Rs.13.58 13.58 per proof litter of bottled liquor liquor, when hen in fact, the Petitioner had agreed to supply liquor at the rate of Rs.0.24 to Rs.0 Rs.0.88 per proof litre. It was submitted that the State Government incurred considerable expenditure in purchasing liquor from the market, which in turn affected its revenue in the form of excise duty. The Petitioner was required to compensate the Respondents for loss and damage age in the form of difference of price as per provisions contained under Rule 5(4)(c) of the Rules ules of 1995. It is on account of this reason the payment was not made to the Petitioner after the month of November, 2004. Consequently, Demand Notices were iss issued to the Petitioner by all the concerned Assistant Excise Commissioner Commissioners / District Excise Officers to deposit the amount of difference of rate. The Petitioner failed to deposit the amount despite aforesaid Demand Notice and since considerable amount had already become due to be paid by the Petitioner, some of the Respondents Respondent started recovering part of the sealing charges from the retailers. Therefore, Petitioner''s plea that sealing charges payable to him were withheld is not justified.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..20..
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58. With regard to the allegation of the Petitioner that the purchases were made at the rate of Rs.16 to Rs. 24 from three favoured voured parties, it was submitted that this averment is incorrect and misleading. The Petitioner himself had purchased 7,07,000 7 litres of rectified ctified spirit from Gwalior Distillers @ Rs.30 Rs.30 per bulk litter, which comes to around Rs.18 per proof litter and transport and incident incidental charges were in addition to it. It was submitted that the Respondents have not affected purchases only from these threee manufacturers as contended by the Petitioner, Petitioner but purchases were also made from almost all the registered distilleries in the State of MP.
59. In reference to Petitioner's contention that it had supplied the liquor as per quantity mentioned in the tender tender notice, and therefore it could not have been penalized on account of non non-supply supply of liquor li in excess of the prescribed quantity, quantity it has been submitted that the quantity mentioned in the tender notice was merely nine months consumption figure. However, the Petitioner was required to supply liquor as per actual demand. The State Government after examining the contentions of the Petitioner,, has therefore rightly rejected it after due consideration. The Gwalior Bench ench of this Court had referred all the four Petitions Petition filed by the Petitioner to the Principal Commissioner for adjudication. However, the Petitioner did not deliberately submit its it Representation epresentation to the State Government, despite several reminders. And it could be filed only on 1.02.2006 2006 whereby it had sought payment payment of certain amount allegedly due to be paid by the Respondents as well as it had questioned the liability to pay difference rence rate of imposition of penalty. The order passed by the Principal Secretary Department of Commercial Taxes axes was given after conducting a detailed inquiry into the various reports called from the Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..21..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 concerned District Excise Officers/Assistant Officer Assistant Commissioner and after collecting the relevant facts and figures figures, the imposition of penalty was found to be just and proper.
60. So far as the allegation of Petitioner, that Respondents had conducted Mantrana meeting behind the back of Petitioner which is against thee principles of natural justice, is concerned, the Respondents have submitted that such meetings were conducted in the routine business of the State Government in order to sort out the issues and it was not necessary to invite the Petitioner for the said meeting.
61. Insofar as reliance has been placed by the Petitioner upon R Rule 4(39) of the MP Distillery Rules,1995 to submit that the State Government could have requisitioned spirit from other distillery at a price determined by the State Government Government, the Respondents have ve submitted that under the Country Spirit Rules 1995, it was thought appropriate to follow the courses available under the said rule instead of invoking Distillery Rules of 1995
62. It was thus submitted that no case is made for this Court to interfere in the Order dated 01.05.2006 passed by Respondent No.2- The Principal Secretary, Commercial Taxation Department of Government of Madhya Pradesh and to quash the Communication dated 06.05.2006 and this Petition deserves to be dismissed.
63. The arguments advanced by both the sides were heard at length and the material placed on record has been carefully perused.
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64. The undisputed facts of the present case are that the Excise Commissioner, Madhya Pradesh floated Tender dated 02.04.2005 for grant of license for supply of liquor in 7 areas and 12 districts. The relevant terms of the Tender Notice dated 02.04.2004 (Annexure Annexure P-7) P for just adjudication of the present case are as under:-
under:
" No. (11) B B-I-12/2004/ CTD-VC-1-Sealed Sealed tenders (separate for each area to be mentioned in the tender) are invited from distellers for the grant of licenses under the provisions of the MP Country Spirit Rules, 1995 to supply country spirit through bonded w warehouses arehouses to the retail sale contractors in sealed bottles with hologram affixed thereon for a period commencing within seven days of grant of such license, ending 31st March 2005.2005
xxxxx xxxxx 6(ii) The successful tenderer shall use the plant during the pe period riod of the contract and on an expiring of the contract, the plant shall have to be handed over to the new successful tenderer against its deprecated cost to be paid by the new successful tenderer. The successful tenderer shall make all such arrangements of o semi automatic bottling at the respective warehouse as would be necessary to ensure that he is capable of supplying 1.5 times the estimated supply of the country liquor in that supply area.
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7. The actual issue of country liquor may exceed the estimated ated issue of country liquor for 2004 2004-05.
05. The tenderer shall bind himself to meet the full requirement of supply of plain and speed spirit from the manufacturing liquor warehouses, storage liquor warehouses, and also to establish and service manufacturing storage warehouse(s), as and when Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..23..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 directed by the state excise commissioner in accordance with Rule 4(3) of Madhya Pradesh Country Spirit Rules 1995 in the respective areas. The requirement might be 1.5 times the estimated amount.
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12. The successful ttenderer enderer shall have to submit an undertaking to pay the losses and compensation for damages to the state government and retail contractors in case of failure to delay of supply of country spirit in his area. In such cases, the supply of country liquor would be ensured from an alternative source; the difference in the price would have to be borne by the defaulting tenderer. The said losses, compensation, and difference would be recoverable from the earnest money referred in Para 4(ii) and security deposit refreferred erred in Para II. Any leftover recovery would be recoverable as areas of land revenue from the tenderer."
65. Under Section 62 of the MP Excise Act, 1915; with regard to manufacture, supply and sale of liquor, liquor, the provisions have been spelt out in MP Country Spirit Rules, Rules 1995 and the tender floated by the Excise Commissioner ommissioner clearly specifies that the terms and conditions of the tender shall be governed by the MP Country Spirit Rules, 1995.
66. According to Petitioner, subsequent upon award of tender, tender certain disputes arose and Petitioner was forced to knock the doors of this Court. Pursuant to the directions of this Court vide Judgment dated 26.9.2005, the dispute was presented before the Principal Secretary Secretary.
67. The Principal Secretary vide its Order dated 01.05.2006 decided the Representation, wherein it observed that since Order dated 26.09.2005 has been received from the High Court, whereby it was directed that the Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..24..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 Petitioner shall be provided with the certified copies of all the documents and orders in respect of recoveries made against him, and thereafter it shall make a Representation which shall be decided after affording an opportunity of hearing to the Petitioner.
68. The Principal rincipal Secretary further observed that by letter dated 24.10.2005 Petitioner etitioner was called upon to make a Representation epresentation, pursuant to which the Representation dated 14.11.2005 was made, wherein the Petitioner took the plea that due to unavailability of the required information, it was unable to make a thorough representation.
sentation. Such kind of plea was again taken by the Petitioner etitioner in its subsequent communications.
69. The Principal Secretary observed that when Petitioner etitioner approached the High Court, it was already having the requisite information.
information However, with an intention to delay the proceedings, it did not make a Representation epresentation to the Principal Secretary in time. The Principal rincipal Secretary also observed that P Petitioner etitioner made its representation only after it was called upon to make a representation, which was almost after four months of passing of the Order rder by this Court.
70. The Principal Secretary did not appreciate the fact that the information sought by the Petitioner was necessary for him to make appropriate Representation and the authority of the Respondents had in fact lingered on the proceedings by not providing the information which was available only in their domain and thereby, delayed the proceedings. Thee Petitioner was deprived of being provided several relevant documents, without which he made only half half-baked baked Representation.
Representation Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..25..
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71. The case of the Petitioner before the Principal Secretary as well as before this Court is that upon grant of tender to the new successful distiller, the outgoing tenderer was liable to hand over 12 days stock whereas in its case, the outgoing tenderer handed over pending challans of 5 lac proof litres, which was an extra burden on it. According to Petitioner there was no shortage and there was adequate supply of liquor to the retail vendors, yet without without assigning any reason, the Respondents Respondent withheld the amount payable to the Petitioner. As on 10.06.2005, the amount payable to the Petitioner was Rs.729.09 Lacs (Annexure P-9).
P
72. The Respondent first defaulted in making payment of Rs.67,32,190/- in terms of its letters dated 22.06.2004; 02.07.2004; 14.07.2004 and 23.07.2004 and thereafter, withheld its payments from 24.8.2004 up to 17.11.2004 17.11.2004.. Even though Respondent vide its letter dated 03.01.2005 (Annexure P P-14) made certain payments to the Petiti Petitioner, however, arbitrarily deducted a sum of Rs.14 Lacs without assigning any reason for the same. Despite Order dated 29.12.2004 passed by the Board of Revenue, no payments were made by the Respondents to the Petitioner, thus scratching the carpets from iits ts feet to completely disable it to function its business and make necessary supplies.
73. The dispute between the parties primarily pertains to the Show Cause Notice dated 10.11.2004 issued by the Excise Officer (Annexure P-10)
10) alleging that as per infor information mation received, there is lack in supply of liquor and because of failure on its part, other distilleries have been kept under consideration as alternative. The Show Cause Notice sought explanation from the Petitioner as to why not under the provisions of Section 5(4) of the MP Country Spirit Rules Rules, 1995,, the areas attached to Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..26..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 its distilleries be not attached to other distilleries on the expense of the Petitioner.
74. The Petitioner has placed reliance upon a table Annexure P P-10A to show that in the areas of Chhindwara, Bhopal and Vidisha; what was the consumption for the year 2003 and the one quoted in Tender Notice for the year 2004-05 05 and even with supply of 20% extra supply of liquor as per Excise Department, the Petitioner had not only met these targets but supplied in excess thereof. The Petitioner has alleged that the consumption was 74.10% more than the one quoted in the Tender Notice.
75. The Petitioner filed its detailed Reply dated 18.11.2004 (Annexure P-13), wherein it alleged that the warehouses at Dewas, Jhabua, Bhopal and Dhar were handed over to the Petitioner in bad shape where operation of bottling was not possible and it had to incur additional cost of Rs.67.56 Lacs to make functional, which stood already communic communicated ated to the Respondents vide its Letter dated 09.11.2004. It also demanded the Respondents to clear its outstanding amount of Rs.67,32,190/ Rs.67,32,190/-- in terms of letters dated 22.06.2004; 02.07.2004; 14.07.2004 and 23.07.2004.
23.07.2004 The Reply also incorporated the details details of the amount of Rs.166.51 lacs recoverable from the outgoing distillers as well as details of amount of Rs.50,64,6111.00 payable by the Excise Department from May, 2004 till October, 2004 to the Petitioner.
76. The Respondents Respondent in its Reply filed before this Court with reference to withholding the amounts payable to the Petitioner ha have explained that the Petitioner etitioner in its reply to the Show Cause Notice dated 18.11 18 11.2004 has never denied the fact that there was failure to maintain minimum stock of liquor as required under Rule 4(4) (a) however, it has tried to justify the Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..27..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 action on account of unforeseen, extremely difficult situation of non-
non availability of raw material, etc. The respondent respondents have explained that when it found that the he supplies in the areas attached to the petitioner were not adequate, it was realized that even if it's license is attached to some other distillery, then also supply would not be adequate and in this view of the matter, it was decided to procure liquor from alternative sources.
sources It is also averred that such uch purchases were made by the Respondent espondents at rates ranging from Rs.16.95 to 24/ 24/- per proof litre of rectified ectified spirit and Rs.
10.88 to Rs. 13.58 per proof litter of bottled liquor when in fact the petitioner had agreed to supply liquor @ Rs. 0.24 to 0.88 per proof litre.
lit The State Government ernment was thus required to incur considerable expenditure in purchasing liquor from the market which in turn affects its revenue in the form of excise duty. The petit petitioner was required to compensate the answering respondents for loss/damage in the form of difference of price as per provisions contained under Rule 5(4)(c) of the Rules of 1995, the same was deducted from amount payable to the petitioner on account of sup supplies made by it from time to time and for this reason, payments were not made to the Petitioner after month of November, 2004.
77. The Respondents have also given another reason for withholding the payments to the Petitioner by stating that Respondent No.3 No received notice dated 09.08.2004 under Section 226 (3) of the Income Tax Act from the Tax Recovery Officer Bhopal, whereby it was directed to pay the Income Tax Department any amount due from the State Government to the Petitioner. Therefore, Respondent No.3 issued directions to the concerned Assistant Commissioners/ District Excise Officers to not make any payment to the Petitioner without permission of Respondent No.3 Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..28..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 and so, during the period 24.8.2004 up to 17.11.2004, the payments could not be made on account of aforesaid orders of the Income Tax Department.
78. The said Respondent has though admitted that the aforesaid Notice dated 09.08.2004 was suspended by the Tax Recovery Officer Bh Bhopal yet again another Notice dated 07.10.2004 was issued to comply its earlier order issued under Section 226 (3) and on the basis of this order, again, Respondent No.3, issued instructions, vide Memo dated 14.10.2004 to not make any payment to the Petitioner.
79. All this time, when Petitioner was not made ppayments ayments towards its supplies, the Respondents Respondent not only issued the impugned Show Cause notice dated 10.11.2004 but also started obtaining liquor from other distilleries for supply to the retailers.
80. The first such purchase is shown to have been made from fr Aggarwal Distillery for the area Dhar on 21.09.2004 which is even prior to issuance of impugned Show Cause Notice. Another such purchase was made from Great Gall Galleon distiller as on 25.10.2004. Besides, purchases were also made from other distilleries namely Oysis Distillery, Gwalior Distillery and Aggarwal Distillery on different dates, within the period from 02.11.2004 till 26.02.2005.
81. The Principal Secretary did not appreciate that if at all Petitioner was unable to meet the high demand and keep the requisite stock of liquor, the Excise Commissioner can obtain the spirit available from other resources but only at a price determined by the State Government. In the Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38 ..29..
NEUTRAL CITATION NO. 2025:MPHC-JBP:23064 2025:MPHC W. P. No. 9443/2006 present case, no cogent reasons have been given as to why the alternative supplies were procured from the mentioned four distilleries.
82. Under Rule 5(4) (a), if there is some occasional failure of supply on the part of the licensee, then only the State State is empowered to purchase the rectified spirit or any country liquor in sealed bottles from the open market. However, under Rule 5(4) (b) in the event of any failure, in continuation of supply, the Excise Commissioner ommissioner may detach the warehouse from the area of the licensee and order its attachment to any other area. Thereafter, only the Excise Officer is permitted to take recourse of Rule 4(3) which empowers to transfer of any warehouse in the supply area to be added to any other warehouse of other suppl supply area.
In the present case, the Show Cause Notice seeking explanation for why not detachment be made was issued after procuring the supplies from other distillers.
83. It is already held that no penalty can be invoked without issuing Show Cause Notice bbut the Respondents proceeded to invoke Rule 4(3) without even issuing Show Cause Notice to the Petitioner. Thus, the purchases were made in utter violation of provision of Rule 5(4) of the Rules and Clause-12 12 of the tender Notice.
84. Furthermore, Respondent No.2 No.2- vide its Order dated 01.05.2006 imposed penalty upon the Petitioner without appreciating that the Excise Commissioner has not only flouted the terms of the Tender Notice but also overlooked looked the provisions of MP Country Spirit Rules, 1995. With the revocation of Rule 12 (2) of the Rules by virtue of Notification dated 11.05.2005, there was no provision for imposition of cost.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 15-05-2025 13:24:38..30..
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85. In view of the above, there is no merit in the Order dated 01.05.2006 passed by the Principal Secretary, tary, Commercial Taxation Department of Government of Madhya Pradesh and it is accordingly quashed. Consequentially, the letter dated 06.05.2006 directing Petitioner to deposit the amount is also set aside.
86. Thee present Petition and pending application, a n, if any, are accordingly disposed of.
(SURESH
SURESH KUMAR KAIT)
KAIT (VIVEK
VIVEK JAIN)
JAIN
CHIEF JUSTICE JUDGE
c.
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 15-05-2025
13:24:38