Karnataka High Court
M/S Samruddi And Company vs The State Of Karnataka on 9 January, 2025
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NC: 2025:KHC:750
WP No. 13582 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF JANUARY, 2025
BEFORE
THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE
WRIT PETITION NO. 13582 OF 2022 (EXCISE)
BETWEEN:
M/S SAMRUDDI AND COMPANY,
P.A.REDDY BUILDING,
BANGALORE- CHITRADURGA ROAD,
CHITRADURGA, A PARTNERSHIP CONCERN
REPRESENTED BY ITS MANAGING PARTNER
SRI.T.PARTHASARATHI REDDY,
S/O T. GOVINDA ROAD,
AGED ABOUT 46 YEARS,
R/AT LAKSHMINARAYANA NILAYA,
3RD PHASE, HOUSING BOARD COLONY,
SURYAPUTRA NAGAR, BEHIND I.U.B.T. LAYOUT,
BANGALORE ROAD, CHITRADURGA - 577501.
...PETITIONER
(BY SRI MAHESH KIRAN SHETTY S, ADVOCATE)
AND:
Digitally
signed by 1. THE STATE OF KARNATAKA,
PRAMILA G V DEPARTMENT OF EXCISE,
Location: VIDHANA SOUDHA,
HIGH COURT AMBEDKAR VEEDHI,
OF BENGALURU 560001.
KARNATAKA REPRESENTED BY ITS PRL. SECRETARY.
2. THE EXCISE COMMISSIONER IN KARNATAKA
BENGALURU, 2ND FLOOR,
BMTC SATELLITE BUILDING,
SHANTHINAGAR, BENGALURU-560027.
3. THE DEPUTY COMMISSIONER EXCISE,
CHITRADURGA DISTRICT,
CHITRADURGA - 577501.
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WP No. 13582 of 2022
4. THE DEPUTY COMMISSIONER,
CHITRADURGA DISTRICT,
CHITRADURGA - 577501.
...RESPONDENTS
(BY SRI MANJUNATH B, AGA FOR R1 TO R4)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF CONSTITUTION OF INDIA PRAYING TO QUASH
THE INTIMATION DTD 30.06.2022 BEARING
NO.EXE/IML/CHI/VA/CL-9/53/2021-22 BY VIRTUE OF WHICH,
THE R2 HEREIN DIRECTED THE PETITIONER TO PAY A SUM OF
RS.11,50,000/- VIDE ANNEXURE-A AND ETC.
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP THIS DAY, ORDER WAS MADE THEREIN
AS UNDER:
CORAM: HON'BLE MR JUSTICE ANANT RAMANATH HEGDE
ORAL ORDER
W.P.No.13582/2022 is filed seeking Writ of Certiorari to
quash the demand dated 30.06.2022, for a sum of
Rs.11,50,000/-, marked at Annexure-A, issued by
respondent No.2 towards fees for transfer of licence. The
relief is also sought to issue writ of mandamus to the
respondents to renew the licence in favour of the petitioner-
Firm.
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2. The petitioner is a Partnership Firm. The
petitioner has secured CL-9 licence from the Competent
Authority, admittedly, the petitioner - Partnership Firm
commenced on 09.05.2006 having three partners namely
Sri.Manjunatha Danappa Hosamani, Sri.R.Prathap and
Sri.T.Parthasarathi Reddy. All the partners had equal shares
in the partnership firm as can be noticed from Clause-11 of
the partnership deed. Thereafter, the Firm was reconstituted
on 21.09.2016, Sri.T.Parthasarathi Reddy, the earlier partner
who had 33% share acquired 95% share, and Sri.R.Prathap
who was also one of the partners earlier, who had 33.33%
retained 5% share. One more partner Sri.Manjunatha
Danappa Hosamani, retired from Partnership Firm. This
Partnership Firm again was reconstituted on 19.11.2021.
3. Sri.T.Parthasarathi Reddy who had 95% share in
reconstituted Firm retained 84% share and new partner
Smt.T.Meena acquired 16% share. One of the former
partners retired.
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4. The petitioner firm sought for renewal of the
licence. The Respondent-Authorities refused to renew the
licence on the premise that the petitioner-Firm has to pay
additional transfer fees on the premise that the constitution
of the Firm has changed for the purpose of Rule 17-B of the
Karnataka Excise (General Conditions of Licences) Rules,
1967 (for short 'Rules, 1967'). The said Rule 17-B- reads as
under:
"[17-B. Transfer of licence in other cases :- (1)
Notwithstanding anything contained in Rule 2,
licences issued.-
(i) for Sale of Indian Liquor (other than arrack)
or Foreign Liquor or both, in Form No. CL-1
(Wholesale licence) or CL-2 (retail shop
licences) [CL-6A (Star Hotel Licence)] or
CL-7 (Hotel and Boarding House Licences)
or CL-9 (Refreshment room (Bar) Licence
under the Karnataka Excise (Sale of Indian
and Foreign Liquors) Rules, 1968; or
(ii) for sale of Beer under the Karnataka Excise
(Lease of Right of Retail Vend of Beer)
Rules, 1976;
The Deputy Commissioner may on an
application by the licencee and [subject to payment
of transfer fee equivalent to twice the annual licence
fee] specified in Rule 8 of the Karnataka Excise (Sale
of Indian and Foreign Liquors) Rules, 1968 or Rule 5
of the Karnataka Excise (Lease of Right of Retail
Vend of Beer, Rules, 1976, as the case may be, and
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with the prior approval of the Excise Commissioner,
transfer such licence in favour of any person named
by such licence, if such person is eligible for grant of
a licence under the Karnataka Excise Act, 1965 or
the rules made thereunder.
(2) Nothing in this rule shall apply to transfer of
licence under Rule 17-A.]"
5. Learned counsel for the petitioner would contend
that the co-ordinate Bench of this Court in the case of
Shankar Wines, Wilson Garden, Bangalore vs. the
Commissioner of Excise in Karnataka and another 1 had
an occasion to interpret Rule 17-B in the context of the
change in the composition of the Partnership Firm.
6. Relying on the said judgment, the learned counsel
for the petitioner would further contend that as long as there
is no divestment of more than 50% share by the original
partnership, it cannot be construed as a transfer, for the
purpose of Rule 17-B. Only in the event of divestment of
more than 50% share in the partnership firm, then only the
additional licence fee is required to be paid under Rule 17-B
of the Rules, 1967.
2017 SCC OnLine Kar 6942
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7. Learned counsel appearing for the respondents
would submit that before making change in the composition
of the partnership Firm, the licencee has to apply for
approval under Rule 17B of the Rules, 1967 and same is not
done as such, the reconstitution is not valid.
8. This Court has considered the contentions raised
at the bar and perused the records.
9. It is noticed that the original partner who had
33.33% share acquired 95% share after the first re-
constitution. Later, he acquired 84% share in the next re-
constitution of the Partnership Firm. This being the position,
if the law laid down in the case of Shankar Wines supra is
applied, respondent-Authority is not entitled to claim
additional licence fee as one of the partners of the original
Partnership Firm has acquired more than 50% stake.
Reason is the increase in the stake is among the partners
who were in place when the licence was granted. And none
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has divested more than 50% of the stake to the incoming
partner/outsider who came in as a new partner.
10. In view of the law laid down in the case of
Shankar Wines supra, the change of composition of the
Firm which does not divest more than 50% of its share to
the incoming new partner does not amount to constitution of
a new entity attracting additional fees under Rule 17-B. In
that view of the matter, there is no transfer of licence so as
to attract additional licence fee under Rule 17-B.
11. The learned Government Advocate contends that
before seeking change in the composition, the petitioner-
Firm ought to have sought the permission of the authority
under Rule 17-B of the Rules, 1967. On reading of Rule 17-B
of the Rules, 1967, it does not indicate so. The requirement
to obtain prior approval of Excise Commissioner is on the
Deputy Commissioner. There is no need to obtain the prior
approval of Excise Commissioner before transferring the
licence. In case, the licencee applies for a transfer of licence,
then the Deputy Commissioner is required to obtain the
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permission of the Excise Commissioner. The applicant is
under no obligation to obtain the permission of the Excise
Commissioner.
12. This being the position, the respondent-Authority
was not justified in issuing Annexure-A demand notice
demanding Rs.11,50,000/- from the petitioner. Hence, the
Writ Petition succeeds and the petition is allowed.
13. The respondent-Authority shall take note of the
change of composition of the partnership firm in terms of the
reconstituted partnership deed dated 19.11.2021 and shall
renew the licence in accordance with law in favour of the
petitioner's firm without insisting for additional licence fee.
14. It is submitted that the petitioner has paid
additional licence fee due to inadvertence. In case, the said
payment is made, the respondent-Authority is under
obligation to refund the same within 2 months from the date
of receipt of the copy of this order. Failing which, the
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respondents shall pay interest @ 8% per annum from the
date of receipt of certified copy of this order till the payment.
Sd/-
(ANANT RAMANATH HEGDE)
JUDGE
GVP, CHS
