[Cites 12, Cited by 0]
Gujarat High Court
Schott Glass India Pvt Ltd vs State Of Gujarat on 1 April, 2026
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C/SCA/9444/2008 JUDGMENT DATED: 01/04/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9444 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK
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Approved for Reporting Yes No
✔
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SCHOTT GLASS INDIA PVT LTD
Versus
STATE OF GUJARAT & ORS.
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Appearance:
MR HR PRAJAPATI(674) for the Petitioner(s) No. 1
MS DIXA PANDYA AGP for the Respondent(s) No. 1,2
NOTICE SERVED BY DS for the Respondent(s) No. 3
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CORAM:HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK
Date : 01/04/2026
ORAL JUDGMENT
1. Present petition is filed under Article 226 of the Constitution of
India and under the provisions of Essential Commodities Act, 1956 (for
short "the E.C. Act) seeking following reliefs:-
(A) Your Lordships be pleased to issue writ of mandamus
or any other appropriate writ, order or direction and be
pleased to quash and set aside the impugned order dated
8-7-2008 passed by the respondent no.2 as being illegal,
invalid, null and void, without jurisdiction and competence,
arbitrary, capricious, unjust, unfair, against the principles of
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natural justice and violative of Art. 14, 19 and 21 of the
Constitution of India.
(B) Your Lordships be pleased to issue writ of mandamus
or any other appropriate writ, order or direction and be
pleased to direct the respondent no. 2 to grant renewal
application of the petitioner company and also direct the
respondent no. 2 to increase limit of stock of furnace oil in
the license as required by the petitioner company and may
go on increasing the same in future so as to enable the
petitioner company to run its plant for 24 hours.
(C) Your Lordship may be pleased to stay
implementation, execution and operation of the order
dated 8-7-2008 passed by the respondent no.2 pending the
admission, hearing and final disposal of this petition.
(D) Your Lordship may be pleased to direct the
respondent no. 3 to continue supply of furnace oil and LDO
pending the admission, hearing and final disposal of this
petition.
(E) Your Lordship be pleased to grant such other and
further reliefs, as are deemed fit, in the interest of justice.
2. Brief facts of the present case are, in nutshell, as under:-
2.1 That the petitioner is a company incorporated and registered
under the Companies Act and engaged in doing the business of
manufacturing pharmaceutical packaging products, the process is
continuous process and factory is running 24 hours and the company
is using furnace oil as fuel in furnace over and above other fuels viz.
gas obtained from GAIL, Liquefied Natural Gas etc. That the company
had made an application under the Solvent Control Order for the
purpose of granting license and at the relevant time the need of the
petitioner of furnace oil is 3200 KL and LDO 2500 KL, which came to
be granted by respondent No.2 and issuance of license date was
09.01.2006 and valid upto 31.12.2006 with certain terms and
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conditions. That the license was issued by respondent No.2 was for a
period of one year and, thereafter, the same shall be renewed for two
years on each occasion. That the petitioner wanted to increase the
limit of stock of furnace oil from IOC, the company had preferred an
application before respondent No.2 with a request to amend the
license and allot the stock of furnace oil quantity to the extent of 6000
KL per year.
2.2 That the application of the petitioner was sent for inquiry
through the Sub - Divisional Magistrate, Bharuch and the Sub -
Divisional Magistrate, vide its letter dated 24.11.2006 reported to the
District Supply Officer, Bharuch that there was no objection, if the
limit was increased of furnace oil. That though the period of license
was to expire on 31.12.2006, the petitioner has preferred application
for renewal of license for the year 2007, but the petitioner failed to
attach the challan receipt for renewal of license fees, the company
had sent with forwarding letter dated 01.12.2006.
2.3 That without issuing notice, respondent No.1 rejected the
application for renewal of license on the ground that the petitioner
was permitted to use 3200 KL per year, but looking to the annual
patrak of fuel consumption by the company, it was exceeded to the
tune of 761.7304 KL furnace oil and, therefore, the request for
renewing solvent license was rejected.
2.4 That after the said order, the petitioner wrote a letter for
renewing license and thereafter the petitioner had written a letter
dated 01.05.2007 to the District Supply Officer requesting that the
recommendation letter may be returned to OICL for not stopping the
supply as request was made by the letter dated 23.04.2007 to
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respondent No.2 to renew the license. That the petitioner was asked
to give undertaking that for renewing the license, the petitioner was
ready and willing to pay fine.
2.5 That the respondent No.2 passed an order on 04.05.2007
imposing penalty of Rs.24,98,743.50 for the breach of condition of
license and the provisions of the Solvent Control Order on the ground
that the petitioner had used 761 KL furnace oil excess than the limit
fixed in the license. The license was renewed for further period of
31.12.2007 by order dated 04.05.2007.
2.6 The being aggrieved by order dated 04.05.2007, the petitioner
had filed an appeal before respondent No.1 pointing out the facts,
under which the petitioner had to use excess stock, however,
respondent No.2 without granting any opportunity of hearing and
issuing notice did not renew the license. The respondent No.1 directed
respondent No.2 to grant opportunity of hearing to the petitioner and
to take fresh decision and the company had filed its reply.
2.7 That the petitioner had submitted an application to respondent
No.2 for renewing the license and additional quota of furnace oil. Till
date, respondent No.1 had not taken any decision on the appeal and
the petitioner had written letter to respondent No.2 pointing out that
the petitioner had filed an appeal against the order dated 11.02.2008.
That the petitioner had submitted bank guarantee, in view of the
pendency of the appeal before respondent No.1 and despite the bank
guarantee, respondent No.2 insisted that the company should deposit
amount and, therefore, it had paid amount of penalty.
2.8 That in the meantime, respondent No.2 issued show-cause
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notice showing the fact that the petitioner had consumed stock of
1895.495 KL furnace oil excess in the year 2007 and thereby
committed breach of provisions of the Solvent Control Order 2000 to
which the petitioner submitted its reply to respondent No.2. That in
the order dated 08.07.2008, it was stated that the license was
renewed in the year 2000 and in the said license shock limit was
shown for furnace oil was 3200 KL and for LDO 2500 Kl and, therefore,
there was no need to request for increasing the limit. It was also
stated in the order that despite there was a limit of consumption of
stock of furnace oil 3200 KL per year in the year 2007, the petitioner
had consumed 5095.459 KL and the consumed stock of 1895.459 KL
and thereby committed breach of the conditions of the license and
since this being second default, the explanation of the petitioner
cannot be accepted and considering the value of excess stock of
1895.459, 15% penalty was imposed to the tune of Rs.1,01,75,928/-.
It was further ordered that if the said amount was not deposited
within the period of seven years, the application for renewal of the
license would be rejected.
3. Being aggrieved and dissatisfied with the said action, the
present petition is filed by the petition.
4. This Court (Coram: Hon'ble Mr.Justice Jayant Patel), has, while
issuing notice, granted ad-interim order i.e. there shall not be any
coercive steps for recovery and the application of the petitioner for
renewal shall not be rejected till further orders.
5. Heard Mr.H. R. Prajapati, learned counsel for the petitioner and
Ms.Dixa, learned Assistant Government Pleader for the respondents.
Perused the material placed on record.
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6. Mr.Prajapati, learned counsel for the petitioner has submitted
the same facts which are narrated in the memo of petition and also
submitted that the impugned order passed by the respondent is
illegal, unjust and against the principles of natural justice and the
approach of respondent No.2 is not justified in the eyes of law. He has
submitted that there is no provision under the Solvent Control Order,
2000 which empowers respondent No.2 to impose penalty for the
breach of conditions of the license and there is also no provision of
cancelling the license in the Solvent Control Order, 2000. He has
submitted that before 2000 there was no prohibition or restriction in
using furnace oil for personal consumption and since, the petitioner is
running the unit the application was made. He has submitted that a
request of the petitioner for extending the limit ought to have been
granted by respondent No.2 since there was no illegality or
irregularity being committed by the petitioner and the petitioner had
time and again requested respondent No.2 to increase the limit of
stock of furnace oil. According to learned counsel, while requesting
the license for the period 2007, respondent No.2 was well aware that
the request of the petitioner for expanding the limit of stock of
furnace oil was pending, no decision was taken and after completion
of one year, respondent No.2 made out a case that the petitioner had
committed breach of conditions of the license by consuming excess
stock of furnace oil. He has further submitted that the company has
been supplied with stock of surface oil by the IOCL even for the period
2007 and 2008 upto till date and IOCL was informed by respondent
No.2 that the petitioner should be continued to supply with stock of
furnace oil. Mr.Prajapati, learned counsel has submitted that the
petition deserves to be allowed and the impugned order deserves to
be quashed and set aside.
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7. Ms.Pandya, learned Assistant Government Pleader for the
respondents has referred to the affidavit-in-reply filed on behalf of the
respondents - authorities and has submitted that the request made
by the petitioner in increasing the limit of furnace oil was not granted
and only positive opinion to increase the stock was given by S.D.M.
and the petitioner has used permissible limit which was granted in
license and thereby the petitioner has used excess unit of the furnace
oil and committed misconduct. She has submitted that while renewing
the license, the respondent - authority has imposed penalty of
Rs.24,98,743/-, which came to be paid by the petitioner till
31.12.2007 and again applied for renewal and during the course of
inquiry, it came to the notice of the authority that the petitioner has
used the excess unit of furnace oil to the extent of 1895.459 KL and,
therefore, after considering the control order issued by the Ministry of
Petroleum and Natural Gas, the respondent - authority has passed the
impugned order. She has submitted that there is no any illegality and
infirmity in the impugned order passed by the authority and,
therefore, the petition being meritless deserves to be dismissed and
the impugned order deserves to be confirmed.
8. Considering the facts and circumstances of the case, the issue
involved in the petition is whether the respondent - authority has
power to impose such penalty under the statute or not, for which the
learned counsel of the petitioners has relied upon the decisions of the
Hon'ble Supreme Court in the case of State of Bihar Vs. Industrial
Corporation Pvt. Limited reported in (2003) 11 SCC 465 and
State of Uttar Pradesh Vs. Saraya Industries Limited reported
in (2006) 11 SCC 129.
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9. In the case of Industrial Corporation Pvt. Limited (supra) ,
the Hon'ble Supreme Court has held and observed in paras - 8, 14,
16, 17 and 18 as under:-
8. The appellant in imposing the penalty, presumably
was of the view that the respondents herein had diverted
the molasses towards manufacturing either country liquor
or liquor, which is fit for human consumption.
14. Coming to the first ground, it is not disputed that no
opportunity of hearing of any kind was afforded to the
respondents herein before the penalty was sought to be
imposed and recovered. It is also admitted that there was
no adjudication of the alleged breach of condition No. 8 of
the tender notice. In A. Mohammed Basheer vs. State of
Kerala and Ors. - (2003) 6 SCC 159, it was held that unless
there is a determination of breach of contract and damages
are quantified, no damages can be imposed and recovered.
In General Manager, North East Frontier Railway and Ors.
vs. Dinabandhu Chakraborty, reported in (1.971) 3 SCC
883, this Court held that the Government cannot be a
judge in its own cause in absence of any statutory
provision empowering it to act as such. In M/s. Vishnu Rice
Mill, Bilaspur vs. Regional Food Controller, Bareitly & Ors. -
1984 All LJ 592 it was held by Allahabad High Court as
under :
"Learned Standing Counsel, however, contended that the
State Government was justified in withholding both the
price payable to the petitioner and the release certificate
claimed by the petitioner if it could be shown that the
claimed by the petitioner if it could be shown that the
petitioner had failed to perform its obligation under the
agreement between the parties. Learned Standing Counsel
placed reliance upon Cl. 9 of the said Order which has been
quoted above. In our opinion, this contention of the learned
Standing Counsel is not tenable. Cl. 9 itself shows that
even though the State Government has a statutory
authority to direct a rice miller, still, the terms and
conditions on which the Government paddy will be
converted into rice by the licensed rice miller will be 'such
terms and conditions as may be agreed upon'. The
agreement itself containing the terms and conditions
cannot be said to be a statutory contract merely because
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the State Government has a right under Cl. 9 to direct a
rice mill to convert paddy into rice. It has been stated
above that along with the counter-affidavit annexure C.A. 1
has been annexed, which is said to be the agreement
between the parties. In Cl. 11 of the said agreement there
is a provision for arbitration in case of dispute, difference,
or question touching or arising out of the agreement or the
subject- matter thereof. In our view, if the State
Government has any grievance that the licensed miller has
failed to fulfill the terms and conditions of the said
agreement between the parties, it is not open to the State
Government to seek its redress in respect of such
grievance by withholding the release certificate under Cl.
3(4) or by withholding or by making any deduction from
the price which is payable by the State Government to the
petitioner under Cl. 7 of the said Order."
16. In the present case, what we find is that before
creating a demand of penal duty or penalty, there was no
adjudication by any authority as regard to the breach
committed by the respondents. We also find that no
opportunity of any kind was offered to the respondents
before the demand as regard the penal duty was pressed
against the respondents. The matter was not even
examined as to what was the reason for shortfall in the
production of rectified spirit. The Molasses Act does not
provide for imposition of such penalty in the event of
shortfall of spirit. It must, therefore, necessarily be held
that the imposition of the impugned penalty being against
the principles of natural justice is illegal and void.
17. The statutory authorities must act within the four-
corners of a statute. They could take recourse to the
proceeding for levy of penalty and the recovery thereof
from the respondents only in the event there existed any
agreement or statutory provision therefor. Such a power
did not exist in the Commissioner of Excise or the
Superintendents of Excise who had issued the impugned
demand notices.
18. The statutory authorities also could not have sought
to levy penalty relying on or on the basis of the audit report
only. They were required to apply their own independent
mind for the purpose of finding out as to whether the
respondents in law had committed any breach of the terms
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and conditions of licence or the provisions of 1947 or 1915
Acts so as to make them liable for levy of penalty. The
concerned authorities acting in terms of the statutory
provisions, therefore, without any further investigation
could not have acted mechanically on the audit report.
10. In the case of Saraya Industries Limited (supra), the Hon'ble
Supreme Court has held and observed in para - 31 as under:-
31. The legislative field in regard to levy of excise duty is
covered by Entry 51, List II of the Seventh Schedule of the
Constitution of India. It may be true that the resort to
regulatory measures can be taken by the State, but the
same must be done in the manner laid down under the Act.
A provision which confers powers upon a statutory
authority in terms whereof a penalty is to be imposed,
damages are to be paid for non payment of excise duty, in
our opinion, must be done through a valid subordinate
legislation and not by way of issuance of a circular letter.
11. Now considering the aforesaid facts and the submissions of
learned counsel for both the sides and the averments made in the
petition as well as the decisions cited at the Bar and on perusal of the
provisions of the E.C. Act more particularly the Control Order of 2000,
it appears that the respondent - authority has no authority to impose
any penalty in other word, the provision which confers powers upon a
statutory authority in terms whereof a penalty is to be imposed,
damages are to be paid for non payment of excise duty, in the opinion
of the Hon'ble Supreme Court was without jurisdiction as legislation
cannot be overridden by way of issuance of a circular letter. While
examining the Control Order, it appears that there was no provision at
all to impose any penalty which was imposed in the present case,
which was mentioned in the impugned order. It is not the case of the
respondents that the petitioner was doing any illegal activities or any
trade in furnace oil and the petitioner is using furnace oil to run
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furnace in manufacturing product and merely because the petitioner
has used excess amount of furnace oil, that was also, when the
application was kept pending by respondent No.2 for uncertain period
for increasing the stock. It is an admitted fact that the petitioner has,
while applying for renewal of license, filed an application to increase
the limit of furnace oil which was granted in favour of the petitioner as
there was usage of furnace oil had increased because of the
manufacturing activities was increased. Under that circumstances, the
order of imposing 15% penalty is absolutely unjustifiable and illegal as
it was not provided under the statute or under the Control Order. It is
also an admitted fact that the petitioner is not in business of selling or
transporting the furnace oil as it was mentioned in the Control Order
and, therefore, the order passed by the Appellate Authority confirming
the order passed by respondent No.2 is completely illegal and unjust
and the same deserves to be quashed and set aside.
12. The statutory authorities must act within frame work of a
statute. They could take recourse to the proceeding for levy of
penalty and the recovery thereof from the petitioner only in the event
there existed any agreement or statutory provision therefor. If such
power is not existing in the Act or in the Control Order then the order
passed by respondent No.2 and confirmed in appeal is wholly
unauthorized and, therefore, this Court is of the opinion that the
respondent - authority has committed an error of law and facts in
passing the impugned order and the same deserves to be quashed
and set aside.
13. In the result, the petition is allowed. The impugned order
passed by respondent No.2 is hereby quashed and set aside. If the
petitioner has deposited such amount of penalty imposed by the
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respondent - authority, the same shall be refunded to the petitioner.
The respondent - authority shall consider the application for
increasing the stock as requested by the petitioner in accordance
with law and without influenced by the order passed by this Court in
the present petition. Rule is made absolute. There shall be no order as
to costs.
(HEMANT M. PRACHCHHAK,J)
V.R. PANCHAL
