Jafar Ali And Others vs State Of U.P. And Others
2012 Latest Caselaw 2350 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Judgment Reserved on17.5.2012
 
Delivered on  30.5.2012
 
Court No. - 32
 
Case :- WRIT TAX No. - 507 of 2011
 
Petitioner :- Jafar Ali And Others
 
Respondent :- State Of U.P. And Others
 
Petitioner Counsel :- Murtuza Ali,Satya Prakash
 
Respondent Counsel :- C.S.C.
 

 
Hon'ble Ashok Bhushan,J.

Hon'ble Prakash Krishna,J.

(Delivered by Hon'ble Ashok Bhushan,J)

Heard Shri Satya Prakash and Murtuza Ali, Advocates for the petitioners and Shri S.P. Kesarwani, learned Additional Chief Standing Counsel for the State respondents.

Counter and rejoinder affidavits have been exchanged, and with the consent of the parties, this writ petition is being finally decided.

The petitioners, licensees of Country Liquor Retail Shops in District Bijnore for the Excise Year 2006-2007 and 2007-2008 have challenged the demand notices issued by the District Excise Officer, Bijnore dated 17/3/2009 and 20/3/2009 requiring them to deposit the amount equivalent to less quantity of monthly guarantee quota lifted by the petitioners for the month in question within a week failing which the same be adjusted from their security deposit.

The brief facts giving rise to the writ petition are: The petitioners were granted licence for retail sale of Country Liquor Shop in District Bijnore. Some of the petitioners were licensees for the Excise Year 2006-07 and some of the petitioners were licensees for the Excise Year 2007-2008. Petitioners deposited the basic licence fee and the monthly instalment of the licence fee during the excise year. With regard to the Excise Year 2006-07, a notice was issued by the District Excise Officer dated 21/1/2008, asking the petitioners to pay excise dues for the year 2006-07 for less lifting of the monthly quota relating to one month, the notice was replied by the petitioners and subsequently the proceedings were dropped. The Excise Commissioner issued a letter dated 09/3/2009, with regard to Excise Year 2009. The Commissioner by the said letter impressed upon all the Excise Officers to ensure lifting of country liquor according to Minimum Guaranteed Quota (hereinafter referred to as the "MGQ"). Reference of receipt of revenue for the month of February, 2009, was mentioned in the letter opining that lifting of quota is not in accordance with the "MGQ" which is adversely affecting the revenue. Notices dated 17/3/2009 and 20/3/2009, were issued to five petitioners i.e. (Petitioner Nos.4,19,25,32 and 33) informing that the quantity of country liquor lifted by them in the month of March, 2007/January, 2007, was less even after adjusting the 20% in the monthly "MGQ", hence they are liable to pay the difference of the amount as excise dues. Similar notices were issued for the year 2007-2008, to the petitioners mentioning about lifting of less quantity of country liquor in one month i.e. (March, 2008/ July, 2007). All the notices had been issued demanding excise dues on the basis of less lifting of quantity of country liquor in one particular month i.e. the month of March, 2007 or January 2007 for the excise year 2006-2007 and in the month of March, 2008 or July 2007 for the excise year 2007-2008. The petitioners after end of Excise year requested the District Excise Officer to refund the security amount deposited by the petitioners, but the same was not permitted to be withdrawn and the same was permitted to be withdrawn only after adjustment of the amount which were sought to be realised from the petitioners. On an application submitted by the petitioners for refund of their security amount, recommendation was made by the Excise Inspector on 23/6/2009, for refund of the security amount after adjustment of the amount due against the petitioners. Petitioners gave a detail notice on 06/7/2010, to the State Government, Excise Commissioner, Deputy Excise Commissioner, District Magistrate/Licensing Authority and District Excise Officer, Bijnore, requesting that their deducted security deposits and interest amount be refunded for the Excise Year 2006-2007 and 2007-2008. In the notice it was stated that all the petitioners have lifted the entire "MGQ" which was fixed for the whole excise year and they were not liable to pay any excise duty on the ground of alleged deficit in lifting the monthly "MGQ". Reference was also given to the licensees of Unnao and Lucknow who were issued similar demand notices after letter of the Commissioner dated 09/3/2009. It was mentioned that the Commissioner Excise U.P. has passed the orders with regard to Unnao and Lucknow licensees where only a penalty of Rs 5000/- was imposed and refund of the security deposit was allowed. Petitioners claim similar treatment as given to them. The District Government Counsel (Civil), Bijnore replied to the notice given by the petitioners vide letter dated 17/8/2010, on behalf of the State Government, Commissioner Excise and other Excise Authorities. In the reply Rule 15(c) of The Uttar Pradesh Excise (Settlement of Licences for Retail Sale of Country Liquor) Rules, 2002 (hereinafter called the "2002, Rules") was relied and it was stated that dues have been directed to be paid by the petitioners since in the months as mentioned in the notices they had lifted less than 80% of the monthly "MGQ". It has been stated in the notices that after giving adjustment of 20%, dues have been demanded. It is stated that the order has already been passed for refund of the security after adjusting the amount of duty on 20/7/2007 which was accepted by the petitioners, hence they are estopped from challenging the action. The copy of the notice as well as the reply given by the District Government Counsel dated 17/8/2010 are filed as Annexures-2 and 3 to the writ petition. The petitioners have come in the writ petition praying for following reliefs:

"(i) Issue a writ, order or direction in the nature of certiorari be passed quashing the impugned notices of demand dated 20-03-2009 issued by District Excise Officer, Bijnore demanding the money for less lifting of monthly quota, however the petitioners had lifted the minimum guarantee annual quota. The copy of this is contained as Annexure No.1-A &1-B to this writ petition pertaining to the Excise Year 2006-07 of Petitioner No.4,19,25,32 and 33 and also of the year 2007-08 deducting from the security deposits of all the petitioners No.1 to 34 be quashed declaring the same to be illegal and void in the light of decision taken in the similarly situated Licensses of District Lucknow and District Unnao.

(ii)Issue a writ, order or direction in the nature of Mandamus, thereby directing respondents to refund the security amount of the petitioners deducted from their security deposits, by the District Excise Officer, Bijnore of the Excise Year 2006-07 of Petitioners No. 4,19,25,32 and 33 and also the security deposits of all the petitioners no. 1 to 34 deposited in the Excise Year 2007-08 as Security Deposits, as the licensees of country made liquor shops of District Bijnore for the period 1.4.2006 to 31.3.2007 and 1.4.2007 to 31.03.2008 and which have been illegally deducted in the name of less lifting of monthly quota of Country Liquor and imposed interest and penalty and details of which is shown in Annexure Nos.1-A and 1-B of this Writ Petition be directed to be immediately released and refunded to the petitioners.

(iii) To issue directions in the nature of mandamus commanding the opposite parties to immediately refund the security deposits after deducting only Rs. 5000/- of each shops of the petitioners without any delay and also with interest for illegal withhelding of the aforesaid security amounts of the petitioners including the interest @ 18% per annum or any amount of interest to which this Hon'ble Court may please to fix, to the petitioners. Treating the petitioners at par and similar with the Licensees of Country Liquor of District Lucknow and Unnao.

(iv) Any other order or direction may also be passed which this Hon'ble Court deems fit ad proper under the facts and circumstances of the case.

(v)Cost of the writ petition may also be awarded to the petitioners."

Learned counsel for the petitioners submitted that the licensees having lifted the annual "MGQ" fixed for the excise year, they were not liable to pay any amount towards the less lifting of country liquor in a particular month. Referring to Rules 14 and 15 of the 2002 Rules, it is submitted that the petitioners are entitled to replenish the deficit of quota within 10 days of the next month and the petitioners having never been informed about any deficit of any previous month, it is not open for the respondents to allege any deficit of lifting of monthly "MGQ". It is submitted that Rules 14 and 15 of the 2002 Rules, have been misinterpreted by the respondents and the earlier notice dated 28/1/2008 was rightly withdrawn. It is submitted that the action of the respondents in issuing recovery notice after the letter of the Excise Commissioner dated 09/3/2009, is unjustified since the letter dated 09/3/2009, was not relevant with the Excise Year 2006-2007 and 2007-2008. It is further submitted that similar action with regard to licensees of Unnao and Lucknow were initiated, but by the order of the Excise Commissioner, only penalty of Rs. 5000/- was imposed on the licensees and the security amounts were refunded. Learned counsel for the petitioners claim that the petitioners are entitled for similar treatment as was meted out with the licensees of Unnao and Lucknow. It is submitted that throughout the excise year at no point of time any notice for alleged less lifting of monthly "MGQ" was issued and the entire annual "MGQ" having been lifted no demand can be raised against the petitioners.

Shri S.P. Kesarwani, learned counsel for the respondents supporting the impugned order contended that under the 2002 Rules, petitioners are obliged to lift the "MGQ" and since they failed to lift the "MGQ" fixed for the month in question as has been mentioned in the notices they are liable to pay the deficit licence fee. It is submitted that since the licensee is at best entitled to lift the 120% of the "MGQ", adjustment of 20% was given and since in the month of March 2007, the licensees lifted less than 80 percent of the MGQ, hence they are liable to pay the licence fee accordingly and orders have been issued which are in accordance with the Rules 14 and 15 of the 2002 Rules. Shri S.P. Kesarwani, further submitted that petitioners have right of appeal under Section 11(1) of the United Provinces Excise Act, 1910, hence they be asked to file appeal before Commissioner Excise. It is further submitted that under the contract entered with the department for grant of licence, petitioners undertook to lift the monthly "MGQ" and to pay the licence fee accordingly. The challenge of the petitioners now raised is nothing but, their action of resiling from the contract for which the writ petition is not the remedy. He has placed reliance on the judgement of the Apex Court in State of Orissa & Ors Vs. Narain Prasad & Ors, 1996 (5) SCC 740.

We have considered the submissions of the learned counsel for the parties and have perused the record.

Before we proceed to consider the respective submissions of the learned counsel for the parties, it is useful to note the statutory scheme regarding the licence fee required to be paid by the licensees for retail country liquor shop. Under the United Provinces Excise Act, 1910, Rules have been framed namely:The Uttar Pradesh Excise (Settlement of Licences for Retail Sale of Country Liquor) Rules, 2002. Rule 2 of the 2002 Rules, is a definition clause which defines the annual minimum guarantee quantity, basic license fee, credit balance of licence fee, licence fee and monthly instalment of licence fee. Rules 2(c), (d), (f), (m) and (n) are quoted below:

"2. Definition.- In these rules, unless there is any thing repugnant in the subject or context:-

(a)....................

(c)"annual minimum guaranteed quantity", means the quantity of "strong" country liquor, as fixed by the Licensing Authority in accordance with the general or specific instructions issued by the Excise Commissioner and guaranteed by the licensee to be lifted by him for his retail shop during an excise year for the purpose of retail sale. However if any licence is granted after the commencement of the excise year then its annual minimum guaranteed quantity shall be reduced proportionately according to the number of days remaining in the excise year;

(d) "Basic Licence fee" means that part of consideration for the grant of licence for the exclusive privilege of retail sale of country liquor under Section 24 of the Act. payable by the person selected as licensee before the licence is grant to him, for the whole excise year of part thereof on such rates as notified by the Excise Commissioner in consultation with the State Government from time to time";

(f) "credit balance of licence fee" is the amount of money equivalent to the duty involved in the excess quantity of country liquor, over and above the monthly minimum guaranteed quantity, lifted by the licensee in a month. This credit balance of licence fee may be carried forward in the ongoing months and may be adjusted against the future monthly instalments of licence fee in accordance with the provisions of these rules;

(m) "licence fee" means the remaining part of consideration for grant of licence for exclusive privilege of retail sale of country liquor under Section 24 of the Act, payable by the licensee, in addition to the basic licence fee. This sum shall be equal to the excise duty leviable on the annual minimum guaranteed quantity fixed for the shop;

(n) "monthly instalment of licence fee" shall be 1/12th part of the licence fee in addition to basic licence fee and shall be payable every month. However the excise duty involved in the quantity of country liquor lifted during the month by the licensee, may be adjusted against the monthly instalment of the licence fee subject to the provisions of these rules."

A perusal of the aforesaid provisions of the 2002 Rules, indicate that for every licensee annual "MGQ" has been fixed which a licensee is obliged to lift in a excise year. Apart from the "Basic Licence fee", a licence fee is to be paid which shall be equivalent to the excise duty leviable on the annual minimum guaranteed quantity fixed for the shop. "Monthly instalment of licence fee" is 1/12th part of the licence fee in addition to basic licence fee. In event a licensee lifts the excess quantity of country liquor over and above the monthly MGQ, he is entitled for "credit balance of licence fee". Rules 14 and 15 of the 2002 Rules, on which much reliance has been placed by the leaned counsel for both the parties relates to payment of monthly instalment of licence fee and consequence of failure, lifting of country liquor in excess of monthly minimum guaranteed quantity and earning of credit balance of licence fee. Rules 14 and 15 of the 2002 Rules are quoted below:

"14.Payment of monthly instalment of licence fee and consequences of failure.-(a) The licensee shall be liable to pay the monthly instalment of licence fee by the last day of the month. However the duty involved in the quantity of country liquor lifted by him during the month and credit balance of licence fee from previous month, if any, shall be adjusted against the monthly instalment of licence fee according to the provisions of these rules.

(b) The licensee shall be required to submit his account and licence fee passbook, giving details of the country liquor lifted by him and the licence fee deposited, to the District Excise Officer by 5.00 p.m. of the 1st day of the next month for verification and calculation of licence fee due from him.

(c) In case there is any short fall in the licence fee, after due adjustment of duty involved in the country liquor lifted by the licensee and credit balance of licence fee from previous month, according to provisions of these rules and district Excise Officer shall adjust the outstanding balance amount of licensee fee from the security deposit of the licensee and also issue a notice to the licensee by the 3rd day of the next month to replenish the deficit in security amount either by lifting such quantity of country liquor involving duty equivalent to the adjusted amount or by depositing cash or a combination of both. In case the licensee fails to replenish the deficit in security amount by the 10th day of the next moth his licence shall stand cancelled.

15.Lifting of country liquor in excess of monthly minimum guaranteed quantity and earning of credit balance of licence fee.-(a) the licensee may lift up to 20% excess quantity of country liquor in a month over and above the monthly minimum guaranteed quantity without any extra payment.

(b) In case he wants to lift extra quantity of country liquor over and above 120% of the monthly minimum guaranteed quantity he shall pay additional basic licence fee on that quantity after obtaining permission of the District Excise Officer.

(c) In case the licensee lifts excess quantity of country liquor in a month over and above the monthly minimum guaranteed quantity, he shall be entitled to earn a credit balance of licence fee:

Provided that such adjustment shall not exceed 20% of the monthly licence fee of the month:

Provided further that the credit balance of licence fee shall be limited to the extent of licence fee only and he shall not be entitled for refund of licence fee or discount in excise duty."

From the facts which have been brought on the record, it is clear that notices for deposit of excise dues for the year in question were issued to the petitioners on the ground that they lifted less quantity of minimum "MGQ" in one particular month which was required to be lifted. The notices further mention adjustment of 20% is to be given in the minimum "MGQ" which is required to be lifted. The facts pertaining to one of the petitioner for example petitioner no.1, Shri Zafar Ali be now noted for deciding the issues which have been raised between the parties. The notice pertaining to petitioner no.1, Zafar Ali, who is a licensee of Country Liquor Shop, Bijnore No.2 for the year 2007-2008 has been filed as Annexure-1B. With regard to the petitioner no.1, details of lifting of country liquor has been mentioned in Tabular form which to the following effect:

da-

nqdku dk uke

okf"kZd ,e0 th0 D;w0 ¼c0yh0es½

ekfld ,e0 th0 D;w0 ¼c0yh0 esa½

ekfld ,ethD;w dk 20% lek;kstu ds i'pkr mBk;h tkus okyh fu/kkZfjr ek+=k ¼c0yh0es½

ekpZ 08 esa mBk;h x;h ek=k ¼c0yh0es½

[email protected] mBk;h xbZ ek=k ¼c0yh0es½

fctukSj ua0&2

92230.00

7685.00

6148.00

4662.00

1486.00

ns; izfrQy 'qkYd dh /kujkf'k

n.Md C;kt

dqy ns; /kujkf'k

136712.00

24608.00

161320.00

Thus, according to the notice dated 20/3/2009, in March, 2008, petitioner was required to lift 6148.00 bulk litres of country liquor, after giving adjustment of 20% percent in minimum "MGQ" and since he lifted only 4662.00 bulk litres of country liquor, there being deficit of 1486 litres, he was held liable to pay amount equivalent to the licence fee with penal interest totalling to Rs. 161320.00. Similarly, notices were issued to the all the petitioners alleging deficit of minimum "MGQ" of one particular month in the excise year. It is relevant to note that against all the petitioners deficit is shown only with regard to one month which is mentioned in the notices. Petitioners have brought on record the details of annual "MGQ" of each shop including the monthly "MGQ" and the total quota lifted by the licensee in the concerned excise year. It is relevant to note the details of the petitioner no.1, Zafar Ali, who was a licensee of Country Liquor Shop Bijnore No.2. With regard to excise year 2007-2008, following are the details of petitioner no.1, Zafar Ali.

o"kZ 2007&08 esa tuin fctukSj dh ns'kh 'kjkc nqdkuks dk ekgokj miHkksx

dz0

ns'kh 'kjkc

okf"kZd

ekfld dksVk

ekgokj miHkksx (c0yh0esa)

dqy ;ksx

MGQ ds lkis{k o`f)@deh

ekg vizSy 2007

ekg ebZ 2007 ls ekpZ 2008 rd

vizSy 07

ebZ 07

twu 07

tqykbZ 07

vxLr 07

flracj 07

vDVqcj 07

uoEcj 07

fnlacj 07

tuojh 08

Qjojh 08

ekpZ 08

fctuksSj ua0 2

92230.00

7695.00

7685.00

7701.00

7686.00

9236.25

7691.

7588.96

7686.69

9738.00

7686.00

7688.04

6957.00

7821.00

4662.00

92242.88

12.88

From the above facts, it is clear that the petitioner no.1, Zafar Ali lifted the entire annual "MGQ" and in fact 12.88 bulk litres were lifted in excess of annual "MGQ" fixed for the shop. The issue to be answered is as to what is contemplated by 2002 Rules, regarding lifting of "MGQ". Whether a licensee who although lifts the annual "MGQ" fixed for the excise year is still liable to pay the excise dues in event there is a short fall in lifting of monthly "MGQ" in one month is the question to be answered.

According to Rule 2(c) read with Rules 2(d) and 2(m) of the 2002 Rules, it is clear that apart from basic licence fee, the licence fee which is liable to be paid by the licensee is a licence fee equivalent to excise duty leviable on the annual minimum guaranteed quantity fixed for the shop. From the facts brought on the record, it is clear that the licence fee for the whole excise year has been entirely paid since the annual "MGQ" fixed for the shop has been lifted by the licensee.

Rule 15(c) of the 2002 Rules, on which much reliance has been placed by the learned counsel for the respondents provides that in case the licensee lifts excess quantity of country liquor in a month over and above the monthly minimum guaranteed quantity, he shall be entitled to earn a credit balance of licence fee provided that such adjustment shall not exceed 20% of the monthly licence fee of the month. The definition of "credit balance of licence fee" in Rule 2(f) of the 2002 Rules, makes it clear that the credit balance of the licence fee may be carried forward in the ongoing months when the licensee lifts the excess quota of the country liquor over and above the monthly "MGQ". The credit balance of the licence fee is a continuous process which indicates credit in the account for the whole year. The credit may continue from month to month and is liable to be adjusted accordingly.

The department in the present case has taken into consideration only one particular month and giving the adjustment of only 20% has calculated the deficiency in lifting of the minimum "MGQ" without giving any allowance to the credit balance of the licence fee earned by the licensee in earlier months. In view of the fact that the licensee for example petitioner no.1, Shri Zafar Ali had lifted the entire annual "MGQ" for the year 2007-2008, the deficit in lifting the monthly "MGQ" for one month cannot be taken into consideration for imposing the liability. Credit balance of the licence fee does not confine to one particular month.

In the present case, the respondents have given the benefit of credit balance of the licence fee to the extent of 20% only for the previous month of February, 2008, while determining deficit of monthly "MGQ" for March, 2008, whereas the credit balance of licence fee of entire year has to be taken into consideration. Thus, in event the licensee had lifted the annual "MGQ" for a year, there cannot be any demand qua deficit of one month by taking monthly "MGQ" of one month in isolation. What Rule 15 (c) of the 2002 Rules provides that if a licensee lifts the excess quantity of country liquor in a month over and above the monthly minimum guaranteed quantity, he shall be entitled to earn a credit balance of licence fee provided that such adjustment shall not exceed 20% of the monthly licence fee of the month. Rule 15 (c) of the 2002 Rules, deals with credit balance of the licence fee with regard to one particular month. It is true that in one particular month even if the licensee lifts the quantity of liquor exceeding more than 20% of the monthly "MGQ" he shall get the benefit i.e. allowance of only 20% but, it does not mean that credit balance of licence fee which has been earned in earlier month of the year shall be discarded.

Rule 15 (c) of the 2002 Rules, confines to credit balance of one particular month, but this does not negate or deny the benefit of credit balance licence fee of earlier months. The respondents thus have not acted in accordance with the true import of 2002 Rules and have imposed the liability of licence fee arbitrarily and de-hors the 2002 Rules.

Learned counsel for the respondents relying on the judgment of the Apex Court in State of Orissa (supra) submitted that the monthly "MGQ" of every month is liable to be lifted. There cannot be any dispute that the monthly "MGQ" fixed for the licensee has to be lifted and they cannot be permitted to contend that they are not liable to pay for the unlifted quantity. Following was laid down in paragraph 30:

"30. Inasmuch as the licencee failed to lift the minimum guaranteed quota, the total issue price of the unlifted quantity was sought to be recovered from him, which was questioned by the licencee in a writ petition. The argument of the licencee based upon Bimal Chandra Banerjee was that the State is really levying excise duty in the name of issue price and that it has no power to do so. Basing upon certain observations in Panna Lal, it was contended by the licencee that issue price can only relate to liquor drawn by the contractor and that it cannot pertain to undrawn liquor. This Court repelled the contention based upon observations in Panna Lal in the following words: (SCC p.147, para7)

"There can be no question that issue price must generally relate to liquor which is drawn by the contractors but it does not follow therefrom that issue price cannot be adopted by agreement between the parties as the measure of compensation to be paid in the case of undrawn liquor. In fact, it may not be quiet correct even to view it as compensation as we shall presently see. It is no more and no less than the price which the contractor agrees to pay for the grant of the privilege to sell liquor drawn or undrawn."

Present is not a case where the licensee had failed to lift the annual "MGQ". Annual "MGQ" fixed for the excise year has been lifted by all the petitioners. Although, the monthly "MGQ" is also fixed which is required to be lifted, but there is benefit of credit balance of licence fee in short fall of the monthly quota which is contemplated. In this context Rule 14 (c) of the 2002 Rules, is also relevant which provides that if there is any short fall in the licence fee, after due adjustment of duty involved in the country liquor lifted by the licensee and credit balance of the licence fee from previous moth, the District Excise Officer shall adjust the outstanding balance amount of licence fee from the security deposit of the licensee and also issue a notice to the licensee by the 3rd day of the next month to replenish the deficit in security amount either by lifting such quantity of country liquor involving duty equivalent to the adjusted amount or by depositing cash or a combination of both. In case the licensee fails to replenish the deficit in security amount by the 10th day of the next month his licence shall stand cancelled.

In the present case, there is no reference of any notice to any of the licensees under Rule 14(c) of the 2002 Rules, given by the District Excise Officer at any point of time.

There is another aspect of challenge to the action of the District Excise Officer demanding excise dues from the petitioners. All the notices dated 17/3/2009-20/3/2009 issued against the petitioners demand balance licence fee relating to lifting of less monthly "MGQ" of only one month. In the notices, the less lifting of monthly "MGQ" has been alleged against the petitioners of one of the following months:

(i)January 2007,

(ii)March, 2007,

(iii)July, 2007 and

(iv)March, 2008.

The months of January and July fall between an excise year. In a case where there is a short fall in the licence fee, after due adjustment of the duty involved in the country liquor lifted by the licensee and credit balance licence fee from previous months the District Excise Officer shall issue a notice to the licensee by the 3rd day of the next month to replenish the deficit in security amount either by lifting such quantity of country liquor involving duty equivalent to the adjusted amount or by depositing cash or a combination of both. Thus, if there is a shortfall in duty in any month a duty is cast on the District Excise Officer to give notice to the licensee who may meet the deficit either by lifting such quantity of counter liquor or by depositing cash or by a combination of both. There is material on the record that for the excise year 2006-07, for the first time a notice was issued on 28/1/2008, pointing out the deficit. During the currency of excise year 2006-07, no notice as contemplated by Rule 14(c) of the 2002 Rules, was given by the District Excise Officer. The notice issued under Rule 14(c) of the 2002 Rules, has a purpose and object. The object is that if a licensee has not been able to lift the minimum "MGQ" in a month he has to be informed of the said deficit so that he may increase his lifting in the next month and for which obviously he has to make extra effort for increasing his sale. Rule 14(c) of the 2002 Rules, thus cast a duty on the District Excise Officer to give notice to the licensee so that licensee make good the deficit. When in a whole excise year, no such notice was given and the licensees have lifted the country liquor more than the annual "MGQ" fixed for the excise year, issuing notices after the end of the excise year claiming any deficit is wholly unreasonable and arbitrary. Similarly, in the excise year 2007-08, no notice was given to any of the licensee and it was only after the end of the excise year that the notices of demand were issued. Had the licensees by the 3rd day of the next month to January/July were informed about the deficit they would have replenished the deficit.

The month of March is the last month of the excise year. Short lifting of monthly "MGQ" in the month of March, cannot be claimed when annual "MGQ" of lifting the country liquor of the entire excise year including the month of March, is fulfilled. There is categorical pleading by the petitioners that the annual "MGQ" by all the petitioners is fulfilled and all of them had lifted the annual "MGQ" of country liquor. For finding out the deficit in the month of March, the credit balance of the licence fee of the licensee for all the earlier months have to be taken into consideration. Majority of the notices issued against the licensees allege less lifting of monthly "MGQ" of the month of March and for finding out the deficit, credit balance of the licence fee of earlier month i.e. February has only been taken into consideration. When the annual "MGQ" of all the licensees is complete including the lifting of country liquor for the month of March, it is clear that the credit balance of licence fee of each licensee of earlier months is sufficient to meet the deficiency in the lifting of country liquor for the month of March. From the above, it is clear that the respondents have demanded the balance excise duty from the petitioners on misinterpretation of the 2002 Rules.

In the facts of the present case, no liability could have been imposed of making payment of balance licence fee from the petitioners on alleged ground of less lifting in one particular month of monthly "MGQ" when all the petitioners have fulfilled the annual "MGQ". Thus, the action of the respondents demanding the balance licence fee is wholly unjustified.

In view of the import of the 2002 Rules, as noticed above since the licensee is entitled to the benefit of credit balance of licence fee of earlier months short fall in one particular month is not determinative of the liability since the short-fall in one particular month is not determinative and while fastening any liability of excise duty in respect to short-fall in monthly "MGQ", the credit balance of licence fee of earlier months is also to be taken into consideration and since the respondents have not taken into consideration the benefit of credit balance licence fee of earlier months and has confined the consideration of only one month the demand of duty raised by the respondents is illegal and beyond the 2002 Rules.

Learned counsel for the respondents has also submitted that there being remedy of appeal available to the petitioners against the demand notices issued by the District Excise Officer before the Commissioner under Section 11 (1) of the United Provinces Excise Act,1910, petitioners be asked to avail the remedy of the appeal. It is relevant to note that under Section 11 (1) of the Act, 1910, a remedy of appeal has been provided against the every order of the District Excise Officer before the Excise Commissioner. In the present case, the action of the respondents have been initiated in pursuance of the circular issued by the Excise Commissioner dated 09/3/2009 which has also been referred to and relied in paragraph 5 of the counter affidavit. In view of the facts of the present case, the remedy of appeal available to the petitioner is not appropriate. Furthermore, the respondents have acted in determining the deficit licence fee from the petitioners by misinterpreting the 2002 Rules, and the issues involved in the writ petition basically relate to interpretation of 2002 Rules, it is appropriate that the issues be decided in this writ petition.

It has been further stated in the counter affidavit that petitioners have accepted the refund of the security amount which was made after due adjustment of the dues, hence the petitioners are estopped from claiming refund of the security amount. From the facts as brought on the record, it is clear that the demand notices issued against the petitioners were issued much earlier to the date when the part refund of the security was taken by the petitioners. The demand raised against the petitioners against the excise dues being not in accordance with the 2002 Rules as held by us the mere fact that the part refund of the security amount was taken shall not disentitle the petitioners to challenge the demand notices and adjustment of the demand from the security amount. Petitioners have thus clearly made out a case for grant of relief.

In view of the foregoing discussion, the writ petition is allowed in the following manner:

(1)Impugned notices dated 17/3/2009 and 20/3/2009, Annexures-1A and 1B are quashed.

(2)The respondents are directed to refund the security amount of the petitioners deducted in pursuance of the demand notices dated 17/3/2009 and 20/3/2009, within a period of one month from the date the copy of the order is produced before the authority concerned. In case the refund is not made in above period of one month, the respondents shall also liable to pay simple interest @ 9% per annum till the date of payment.

(3)The parties shall bear their own costs.

Order Date :- 30.5.2012

SB