Madras High Court
The State Of Tamil Nadu vs Loganayaki on 25 February, 2025
Author: Mohammed Shaffiq
Bench: Mohammed Shaffiq
W.A.No.76 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 25.02.2025
CORAM
THE HON'BLE MR.K.R.SHRIRAM, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE MOHAMMED SHAFFIQ
W.A.No.76 of 2022
C.M.P.No.674 of 2022
1. The State of Tamil Nadu,
Rep. by its Secretary,
Prohibition And Excise Department,
Fort St. George, Chennai 9.
2. The District Collector,
Coimbatore.
3. The Deputy Commissioner (Excise),
Coimbatore.
4. The Divisional Excise Officer,
Coimbatore South,
Divisional Excise Officer Office,
North Thasildar Office Compound,
Coimbatore 641 018. .. Appellants
Vs
Loganayaki
W/o. Late Nithiyanantham,
Palarpathy Village, Chokkanoor Post,
Pollachi Tk, Coimbatore Dist. .. Respondent
Page 1 of 11
https://www.mhc.tn.gov.in/judis
W.A.No.76 of 2022
Prayer: Appeal filed under Section 15 of the Letters Patent against the order
dated 24.08.2018 passed in W.P.No.9855 of 2018 on the file of this Court.
For Appellants : Mr.A.Edwin Prabakar,
State Government Pleader
assisted by Mr.M.Habeeb Rahman,
Government Advocate
For Respondent : Mr.J.Aravind
for Mr.M.N.Balakrishnan
*****
JUDGMENT
(Judgment of the Court was delivered by the Hon'ble Chief Justice)
The State of Tamil Nadu, which is the appellant herein, is aggrieved
by an order pronounced on 24.08.2018 by a learned Single Judge of this
Court. By the said order, the learned Single Judge was pleased to quash
and set aside the impugned notice dated 19.12.2017.
2. By the said notice, the Divisional Excise Officer, who was the
fourth respondent in the petition, demanded a sum of Rs.15,03,911/-
claiming to be the notional loss for the sale of arrack in respect of arrack
shop Nos.42, 45 and 48 for the Excise Year 1982-83.
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3. Respondent, that is Loganayaki, who was the petitioner in the writ
petition, is the widow of one of the three partners of a firm, M/s.Sakthiman
Enterprises. The firm was an allottee of arrack shops licence. Loganayaki's
husband, Nithyanandam, was a partner. Mr.Prabakar states that at some
stage, the said Loganayaki also claims to have been a partner, but we would
not go into that aspect much because it is not relevant to the matter in
hand. After Nithyanandam died and subsequently, the other two partners
also died, the firm stood automatically dissolved.
4. The partnership firm was declared as a successful bidder in respect
of four shops, i.e., Shop Nos.63, 42, 45 and 48 and since Shop No.63 was
allotted in a thickly populated area, there was difficulty in identifying a
non-objectionable place to locate the shop and the location chosen by the
firm was rejected by the Department for various reasons. In view of the
delay in locating a shop, a notice to re-auction Shop No.63 was issued. The
notice was put to challenge by filing a suit before the District Munsif,
Coimbatore and as the excise year had expired, the suit was dismissed as
infructuous.
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5. The firm demanded refund of a sum of Rs.2,40,000/- that it had
paid as deposit which was not accepted. On the contrary, the Department
demanded payment of notional loss for not only Shop No.63, but for the
other shops as well, namely, Shop Nos.42, 45 and 48. A sum of
Rs.7,20,000/- was demanded. A writ petition was filed by the firm, which
came to be dismissed stating that the liability can be worked out in
accordance with law at the appropriate stage.
6. A third demand notice was issued calling upon the firm to deposit
a sum of Rs.13,63,384/- on or before 10.07.1994. By then, all the three
partners died leaving respondent to agitate alone. Respondent filed another
writ petition challenging the demand notice dated 30.06.1994 and the
Court vide an order dated 19.03.2001, directed respondent to make a
representation and the same was to be considered within a time frame. A
representation was made on 05.05.2001 and respondent was called to
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attend an enquiry, which was again put to challenge by respondent in
O.S.No.1677 of 2001. While the suit was pending, an order was passed by
second appellant, namely, The District Collector, directing respondent to
pay a sum of Rs.13,63,384/- towards notional loss and Rs.12,34,289/-
towards penalty. After this order, the suit came to be dismissed for default.
Once again, respondent approached the Civil Court, which suit was also
dismissed for default on 04.05.2006. Appellants issued a public auction
notice dated 15.12.2004 bringing respondent's immovable property for sale
for recovery of the said amount. Respondent gave an undertaking to pay the
entire notional loss to be cleared by her in monthly instalments of
Rs.20,000/- each. Respondent paid a sum of Rs.6,43,384/- being the
notional loss in respect of three shops namely, Shop Nos.42, 45 and 48 and
interest at Rs.1,89,100/-. It is, thereafter, the impugned notice dated
19.12.2017 was issued demanding penal interest on the said amount. (To
be noted, there is no such term called 'penal interest' and it is actually an
interest at a higher rate, which is referred to as 'penal interest'). That notice
was challenged and this Court was pleased to quash and set aside the said
notice by the order dated 24.08.2018 impugned in this appeal.
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7. Various submissions have been made by respondent including that
a penal interest cannot be demanded invoking the provisions of the
Revenue Recovery Act, more so, when respondent had paid the entire
notional loss and interest thereon. In fact, counsel, relying upon an order
dated 13.08.2020 passed by a learned Single Judge in W.P.No.3686 of
2020, A.P.Dharmalingam vs. Commissioner of Prohibition and Excise,
Ezhilagam, Chepauk (unreported), submitted that the notional loss itself
was not payable and therefore, the notional loss together with interest paid
should be refundable. This order of the learned Single Judge in
A.P.Dharmalingam (supra) has been confirmed by a Co-ordinate Bench of
this Court on 21.1 1.2023 in W.A.No.1140 of 2021, The Commissioner of
Prohibition and Excise and others vs. A.P.Dharmalingam. The Court
was pleased to observe that Section 18-I of the Tamil Nadu Prohibition Act,
1937 having been amended only in the year 1989 and earlier there being no
provision for levy of notional loss, the Revenue demanding notional loss for
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1982-83 was not valid.
8. Sri.Prabakar submitted that G.O. Ms.No.81 has been issued by the
Prohibition and Excise Department on 05.04.2004, wherein it is directed
that interest should be levied on belated payment and based on the said
Government Order, the interest was worked out at Rs.16,93,011/-. It was
also submitted that respondent has been time and again dragging the
department to the Court to delay the recovery proceedings and to avoid
paying the dues of the department and hence, the department was justified
in issuing the impugned notice.
9. Admittedly, the licence was granted to the erstwhile firm for the
Excise Year 1982-83. At that stage, there was no provision for imposition of
penal interest. In 1989, a Government Order was issued, by which the
penal interest was introduced at 5%. This was later increased in 2004 to
12%. Sri.Prabakar submitted that the Government Order provides for the
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same to be applied retrospectively. We are afraid, we cannot accept the
Revenue's submissions because when the licence was granted to the
erstwhile firm in 1982-83, there was no provision for levying penal interest.
Therefore, if such penal interest is introduced retrospectively, it would
effectively mean changing the licence conditions. Moreover, what is sought
to be recovered from respondent is the penalty termed as 'interest' for the
belated payment. In agreeing to accept the payment of notional loss in
instalments, the department can be deemed to have condoned the delay in
remitting the notional loss.
10. In any case, as held by this Court in A.P.Dharmalingam (supra)
(both Single Judge's order as well as Division Bench's order), even this
notional loss is not required to be paid. Consequently, even the interest was
also not required to be paid. At this stage, Sri.Prabakar states that Rule 21
of the Tamil Nadu Toddy and Arrack Shops (Disposal in Auction) Rules,
1981, provides for notional loss and the same was not brought to the notice
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of the Court in A.P.Dharmalingam's case (supra). Mr.Prabakar states that
in an appropriate matter that issue will be raised. It is open to the Revenue
to raise such an issue, however, we are not making any observation.
1 1. In the circumstances, this writ appeal is dismissed. There shall be
no order as to costs. Consequently, the interim application stands
dismissed.
Mr.Aravind for respondent seeks a direction to the Revenue to refund
the amounts paid. Respondent may apply to the concerned authority and
within eight weeks of receiving the application, the refund shall be
disposed.
(K.R.SHRIRAM, C.J.) (MOHAMMED SHAFFIQ,J.)
25.02.2025
sra
To
1. The Secretary to Govt. of Tamil Nadu,
Prohibition And Excise Department,
https://www.mhc.tn.gov.in/judis
Fort St. George, Chennai 9.
2. The District Collector, Coimbatore.
3. The Deputy Commissioner (Excise), Coimbatore.
4. The Divisional Excise Officer,
Coimbatore South, Divisional Excise Officer Office,
North Thasildar Office Compound,
Coimbatore 641 018.
https://www.mhc.tn.gov.in/judis
The Hon'ble Chief Justice
and
Mohammed Shaffiq, J.
(sra)
25.02.2025
https://www.mhc.tn.gov.in/judis
