Telangana High Court
United Spirits Ltd., vs The State Of Telangana, on 14 October, 2024
Author: T. Vinod Kumar
Bench: T. Vinod Kumar
1
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
WRIT PETITION Nos.27288 & 27289 of 2014
COMMON ORDER:
Since these Writ Petitions are filed by same petitioner
involving a common lis, they are being disposed of by this
common order.
2. Heard learned Counsel for petitioner, learned Government
Pleader for Prohibition and Excise appearing on behalf of
respondent Nos. l and 2, Sri M.V. Durga Prasad, learned counsel
for respondent No. 3 in W.P. No. 27288 of 2014 and Sri B.S.
Prasad, learned counsel for respondent No.3, in W.P. No. 27289 of
2014 and perused the record.
Facts in W.P. No. 27288 of 2014:
3. The case of the petitioner in brief is that it is a Company
incorporated under the provisions of the Companies Act, 1956,
inter alia engaged in the manufacture and sale of Indian Made
Foreign Liquor (IMFL) and alike products; that the petitioner has
its manufacturing units at Malkajgiri, Ranga Reddy District,
situated in the State of Telangana; that the petitioner's
manufacturing Unit at Malkajgiri, Ranga Reddy District was issued
with license to manufacture IMFL with an installed capacity of 550
Lakhs PL under the provisions of the Andhra Pradesh Excise Act,
1968 (for short the Act, 1968'), in the composite State of Andhra
Pradesh; and that upon bifurcation of the composite State of
Andhra Pradesh into the States of Telangana and Andhra Pradesh,
the subject Unit of the petitioner is now located in the State of
Telangana.
4. It is the further case of petitioner that in order to export the
IMFL manufactured by it at its unit situated at Malkajgiri, Ranga
Reddy District to the Depots situated in Andhra Pradesh after
02.06.2014, it had made an application as per Rule 10 Andhra
Pradesh Excise (Import, Export and Transportation of 'IMFL' and
Foreign Liquor Permits) Rules, 2005 (for short 'the Rules') by
submitting an application in Form-L4 to the 2nd respondent for
grant of export permit along with the prescribed fee.
5. Petitioner further contends that on obtaining export permit
subject to payment of Excise Duty on IMFL proposed to be
exported or on furnishing Bank Guarantee from the scheduled
Bank covering the extent of entire Excise Revenue due on the
consignment, the 2nd respondent authority would grant permission
to the applicant/petitioner to export the IMFL to the place of
destination permitted therein.
6. It is also the further case of petitioner that export of IMFL to
the place of destination is based on import permit granted by the
destination-State importing the IMFL.
7. It is the further case of petitioner that on dispatching the
consignment and delivering the same at the import destination
State, the petitioner is required to obtain/secure verification report
from the concerned Prohibition and Excise Officials of respective
State who had issued import permit and the said verification report
issued by the Officials of the Prohibition and Excise Department of
the destination location is required to be submitted to the Export
Permit issuing authority i.e., the 2nd respondent herein within 21
days as per Rule 11-A of the Rules after expiry of the validity of
the Export Permit, failing which the Excise Duty paid or the Bank
guarantee furnished shall be invoked and encashed by the
Government towards Excise Revenue due on the consignment and
no new permit shall be issued until such verification report for the
previous consignments is furnished.
8. It is also the further case of petitioner that during the month
of July, 2014, it had obtained 279 Export Permits for exporting
IMFL to the State of Andhra Pradesh and the Prohibition and
Excise authorities in the State of Andhra Pradesh also having
issued corresponding Import Permits, the petitioner had furnished
various Bank Guarantees aggregating to Rs.18.30 crores to cover
the Excise Duty due on the aforesaid consignment.
9. Petitioner further contends that on the 2nd respondent issuing
the Export Permit, it had undertaken export of the consignment
permitted under the aforesaid Export permits within its validity and
in respect of the said exports made, the petitioner was required to
obtain Excise Verification Certificate (EVC) issued by the officials
of the Prohibition & Excise Department of the importing State and
furnish the same to the 2nd respondent authority within 21 days
from the date of expiry of the export certificate validity.
10. Petitioner further contends that in respect of the export of
IMFL made during the month of July 2014, the EVCs were
required to be submitted in the month of August, 2014 i.e. within
21 days from the date of export / validity of the export permit.
11. It is also the case of the petitioner that though it had made
export against 279 export permits issued by the 2nd respondent
authority, it could obtain and submit EVC numbering to 198 within
21 days, EVCs in respect of 80 export permits were obtained from
the officials of the importing State viz., Andhra Pradesh and
furnished to the 2nd respondent authority with a maximum delay of
19 days and in respect of the remaining 1 export consignment, the
petitioner could not obtain the EVC for furnishing the same to the
2nd respondent authority from the date of expiry of 21 day period
prescribed under Rule11-A of the Rules.
12. It is the further case of the petitioner that non-obtaining and
furnishing of EVCs by the petitioner within 21 days' time
prescribed under the Rules is on account of exports being affected
to the State of Andhra Pradesh, which was formed only on 02-06-
2014, about a month ago and on account of the importing State
having shortage of godowns/warehouses for storing the
consignments received by affixing holographic excise adhesive
labels of the importing State, there has been a delay of 19 days in
obtaining and submitting the aforesaid EVCs to the 2nd respondent
authority.
13. Petitioner further contends that officials of the Prohibition
and Excise of the destination State i.e. State of Andhra Pradesh
issued import permit, did not claim of non-receipt of the
consignment on the basis of import certificate issued in favour of
the petitioner and on the other hand due to bifurcation of the State
and the issues arising on account of bifurcation, there has been
some delay in the officials of the destination State issuing EVCs
and the respondent No.2 authority had sought to invoke the Bank
Guarantee submitted by the petitioner covering 81 export permits
in respect of which there has been a delay of 19 days in submitting
the EVCs.
Facts in W.P. No. 27289 of 2014:
14. The petitioner claims that it has manufacturing unit at
Nacharam, in Ranga Reddy District in the State of Telangana; that
the said manufacturing Unit was issued with license to manufacture
IMFL with an installed capacity of 209.25 Lakhs PL under the
provisions of the Andhra Pradesh Excise Act, 1968 in the
composite State of Andhra Pradesh; and that upon bifurcation of
the composite State of Andhra Pradesh into the State of Telangana
and the State of Andhra Pradesh, the subject Unit of the petitioner
now is located in the State of Telangana.
15. It is also the further case of petitioner that during the month
of July, 2014, it had obtained 106 Export Permits for exporting
IMFL to the State of Andhra Pradesh and the Prohibition and
Excise authorities in the State of Andhra Pradesh also having
issued corresponding Import Permits, the petitioner had furnished
Bank Guarantee dated 28-06-2014 for a sum of Rs.1.00 crore to
cover the Excise Duty due on the aforesaid consignment.
16. It is also the case of the petitioner that though it had made
export against 106 export permits issued by the 2nd respondent
authority, it could obtain and submit within 21 days EVCs only in
respect of 96 exports from the officials of the importing State viz.,
Andhra Pradesh and in respect of the remaining 10 consignments,
which were exported in the month of July, 2014 the petitioner
could get the EVCs and furnish the same to the 2nd respondent
authority with a delay of 1 day to 10 days from the date of expiry
of 21 day period prescribed under Rule11-A of the Rules.
17. It is the further case of the petitioner that non-obtaining and
furnishing of EVCs by the petitioner within 21 days' time as
prescribed under the Rules is on account of exports being affected
to the State of Andhra Pradesh, which was formed only on
02-06-2014, and on account of importing State having shortage of
godowns/warehouses for storing the consignments received by
affixing holographic excise adhesive labels of the importing State,
consequently resulting in delay of 1 to 10 days in submitting the
aforesaid EVCs, the respondent No.2 authority had sought to
invoke the Bank Guarantee submitted by the petitioner covering
the 10 export permits by invoking the Bank Guarantee to an extent
of Rs. 56,63,013.75 ps.
18. It is also the further case of the petitioner that the petitioner
having submitted EVCs between 21-08-2014 to 27-08-2014 in
respect of EVCs which were required to be submitted between
18-08-2014 to 25-08-2014, in spite of the 2nd respondent authority
having received EVCs., had initiated action to invoke the Bank
Guarantee furnished by it covering the Excise Duty of the 10
export consignments.
19. Petitioner further contends that the 2nd respondent had
resorted to the invocation of Bank Guarantee without issuing any
notice to the petitioner, which action it is contended highly illegal,
arbitrary and contrary to the Rules inasmuch as the said Rule
mandating furnishing of EVCs within 21 days being only directory
in nature.
20. During pendency of the present Writ Petitions, the petitioner
had sought for amendment of the Writ Petition prayers seeking for
refund of the Bank Guarantee amount inasmuch as the
3rd respondent had made payment of the amount as demanded by
the 2nd respondent under Bank Guarantees in a sum of
Rs.5,05,91,657/- on 13-09-2014 and in a sum of Rs. 59, 67,675/-
on 12-09-2014. The said amendment of prayer sought for in both
the writ petitions were allowed by this Court vide order dated
21-06-2022 passed in I.A.No.2 of 2014 therein.
21. Thus, petitioner now prays for grant of refund of the amount
recovered by the 2nd respondent by encashing the Bank Guarantees
in respect of export permits for which EVCs have been furnished
by the petitioner with delay.
22. Counter-affidavit on behalf of respondent No.2 is filed in
both the writ petitions.
23. By the counter-affidavit, 2nd respondent claims that Rule
11-A of the Rules mandates furnishing of EVCs within 21 days
after expiry of validity of export permit and since the petitioner in
W.P. No.27288 of 2014 did not submit the EVCs in respect of
export permits, whose validity had expired in the month of July,
2014, and similarly in respect of export permits in W.P. No. 27289
of 2014, the validity having expired between 28-07-2014 to
04-08-2014, the petitioner therein were required to submit EVCs
between 27.07.2014 to 23.08.2014 and between 18-08-2014 to
25-08-2014 respectively.
24. By the counter-affidavit, it is contended that since,
admittedly the petitioner in both the Writ Petitions had submitted
the EVCs only after 21 days period as prescribed under Rule 11A
of the Rules, the respondent authorities are entitled to invoke the
Bank Guarantees to recover the Excise Duty in respect of the
consignments for which EVCs were not submitted within the time
mandated under the Rules.
25. By the counter-affidavit, it is further stated that the petitioner
cannot take shelter for delay in submission of EVCs in respect of
consignments covered by the export permits issued by the State of
Telangana, under the pretext of bifurcation of State inasmuch as
the said prescription under the Rules is mandatory.
26. By stating as above, the respondent Nos.1 and 2 sought for
dismissal of the Writ Petitions.
27. On behalf of respondent No.3 it is stated that since the said
respondent had received communication from the 2nd respondent
authority invoking the Bank Guarantees furnished by it, it had
remitted the aforesaid amount by issuing a Demand Draft as the
bank guarantees furnished were unconditional guarantees.
28. I have taken note of respective contentions urged.
29. Before adverting to the respective contentions urged, it is to
be noted that prior to bifurcation of composite State of Andhra
Pradesh into the State of Telangana and the State of Andhra
Pradesh under the Andhra Pradesh Reorganization Act, 2014, the
movement of IMFL from the petitioner's Unit at Nacharam to
various locations in the erstwhile composite State of Andhra
Pradesh was undertaken with the labels issued by the same State
Excise Authorities. However, it is on account of intervening
circumstances and bifurcation of the State w.e.f. 02-06-2014, the
movement of the IMFL from the petitioner Unit at Malkajgiri and
Nacharam, in Ranga Reddy District w.e.f. 02-06-2014 located in
the State of Telangana to various destinations now forming part of
the State of Andhra Pradesh, being the importer they need to be
affixed with the labels of the destination State by the concerned
State Excise authorities.
30. Though, the composite State of Andhra Pradesh has been
bifurcated into two States w.e.f. 02-06-2014, judicial notice can be
taken of the fact that the division of assets and liabilities, allocation
of Officers did not take place on the date of formation of the State
and for that matter, the Reorganization Act itself provides that the
Hyderabad City (wherein the offices of respondent Nos.1 and 2 are
situated) would be the common Capital for both the States for a
period of 10 years.
31. Further, this Court cannot be ignorant of the fact that on
account of bifurcation of a State, issues like allocation of existing
Staff between the two States would arise and bifurcation of
composite State of Andhra Pradesh is no exception. Therefore,
though the respondent authorities by the counter-affidavit had
claimed that bifurcation of the State is only being put up as a
boogie by the petitioner, this Court is of the view that the said
submission is being made by the respondent authorities ignorant of
the actual situation prevalent post-bifurcation of the State, and
projecting as if the bifurcation is like a mechanical process which
would start functioning with the press of a button w.e.f.
02-06-2014.
32. On the other hand, the action of the 2nd respondent authority
in not considering the submission / explanation of the petitioner for
delay in submitting the EVCs on account of bifurcation of the
State, in the considered view of this Court is a mechanical
approach adopted by the respondent authorities.
33. Though, the respondent authority by the counter-affidavit
claims of the petitioner taking shelter of the bifurcation of the State
for delay in submitting EVCs in respect of various consignments,
however, does not dispute the fact of petitioner in fact furnishing
EVCs in respect of 80 consignments excluding 1 (one)
consignment involved in W.P. No. 27288 of 2014 with an outer
delay of 19 days and in respect of 10 consignments involved in
W.P. No.27289 of 2014 being submitted with a overall delay of 1
to 10 days.
34. Further, it is also to be noted that the respondent authorities
in order to justify their action of resorting to encashing the Bank
Guarantees has placed reliance on Rule 11-A of the Rules to claim
that it is mandatory for the exporter to submit EVCs within 21 days
after expiry of the validity of the export permit, the said Rule is
analogous to Rule 12-A of the A.P. Indian Liquor and Foreign
Liquor Rules, 1979, and reads as under :
Andhra Pradesh Indian Liquor Andhra Pradesh Excise (Import,
and Foreign Liquor Rules, 1979 Export and Transport of Indian
(for short 'Rules, 1979) Liquor and Foreign Liquor-
Permits) Rules, 2005 (for short
'Rules, 2005)
Rule 12-A: Rule 11A. Furnishing of
verification report.
The exporter shall obtain a The exporter shall obtain a
verification report from the verification report from the
Excise Officer at the destination Prohibition and Excise officer at
of the consignment and furnish the destination of the
it to the authority who issued the consignment and furnish it to
export permit within 21 days the authority who issued the
after expiry of the validity of the export permit, within twenty-
export permit, failing which the one days after expiry of the
excise duty paid shall accrue to validity of the export permit,
the Government or the bank falling which the excise duty
guarantee furnished shall be paid, shall accrue to the
invoked and encashed amount Government or the Bank
adjusted towards Government guarantee furnished shall be
revenue and no new permit shall invoked and encashed amount
be issued until verification adjusted towards Government
reports for the previous revenue. No new permit shall be
consignments are furnished". issued until verification reports
for the previous consignments
are furnished.
35. A reading of the aforesaid Rules indicate that Rule 11A of
the Rules, 2005 is in pari materia to Rule 12-A of Rules, 1979.
36. It is to be noted that Rule 12-A of Rules, 1979, wherein a
similar prescription like Rule 11A of Rules, 2005, for submission
of verification report within 21 days existed, was subject matter of
challenge in the case of Mc. Dowell and Co.Ltd., v. Commissioner
of Excise, A.P. & Anr.1, before a Division Bench of the erstwhile
High Court of Andhra Pradesh. The Division Bench of the High
Court by applying the principles enunciated by the Hon'ble
Supreme Court in R.B.Sugar Company Vs. Rampur
Municipality2, A.V.Fernandez Vs. State of Kerlala 3 and Gursahai
Saigal Vs. Income Tax Officer 4 and also referring to the judgment
of Division Bench of the Kerala High Court in State of Kerala and
Others v. Mc. Dowell & Co. Ltd5, had held that provision
regarding production of verification certificate though was
mandatory, the prescription of time limit for production of such
certificate is to be construed only as a directory and accordingly,
1 1998 SCC Online AP 32
AIR 1965 SC 895
AIR 1957 SC 657
AIR 1963 SC 1062
1989 SCC Online Ker 691
restrained the respondents from invoking the Bank Guarantees
furnished by the petitioner therein.
37. The aforesaid dicta as laid down by the Division Bench of
this Court clearly governs the issue at hand.
38. Further, it is also to be noted that the requirement to furnish
EVCs is prescribed in the Rules of 2005 and not under the Act. It
is settled law that the Rules being procedural in nature, the same
cannot be applied in 'stricto sensu' so as to give them the status of
a statutory enactment.
39. Further, a reading of Rule 11-A of the Rules would indicate
that on failure to furnish verification report within 21 days after
expiry of validity of the permit, the Excise Duty paid or due
amount secured under the Bank Guarantee can be invoked and
adjusted towards the Government Revenue, as the authority is
conferred with the power not to issue new export permit until
verification report for the previous consignments are furnished.
This part of Rule 11-A of the Rules indicates that upon failure to
furnish the verification reports in respect of previous consignments,
the authority is required to satisfy itself that the Exporter has failed
to furnish the verification reports in respect of the previous
consignments and is thus, to be called upon to pay the appropriate
Excise duty before being issued with new export permit. It is only
on failure to make payment of the Excise duty due on such
consignments for which EVC is not received, the authority can
invoke and encash the Bank Guarantee furnished covering the
Excise Duty due on the said consignment and for the said reason
also the use of the word 'shall' in the Rule is to be considered as
being applicable to the furnishing of EVCs mandatorily and not in
relation to the time line within which it is required to be furnished.
40. In the facts of the case, as noted above, since the petitioner
having submitted the EVCs, though with a delay upto 19 days
covering 80 export permits in W.P. No.27288 of 2014 and delay of
1 to 10 days covering all the 10 export permits in W.P. No.27289
of 2014, even before the 2nd respondent authority had initiated
action for invoking the Bank Guarantees by addressing letter dated
06.09.2014 and 10.09.2014 respectively, to the 3rd respondent, this
Court is of the view that the 2nd respondent had failed to consider
the scope and ambit of Rule 11-A of the Rules, 2005, in its correct
perspective and the actions of the 2nd respondent are purely driven
by Revenue considerations.
41. Thus, the action of the 2nd respondent in encashing the Bank
Guarantees furnished by the petitioner merely on the ground of
delay in submission of EVCs, without taking note of the fact that
the said EVCs having been furnished though with delay, and in
pari materia Rule in Rules, 1979, having been held to be only
directory and not mandatory, the action of the 2nd respondent
authority, in the considered view of this court cannot be held to be
valid exercise of powers conferred on the said authority.
42. For the reasons indicated as above, this Court is of the view
that the action of the respondent authorities in invoking the Bank
Guarantees for an amount of Rs.5,05,91,657/- and Rs.59, 67,675/-
respectively, cannot be held as validly undertaken for it to be
sustained.
43. Accordingly, the Respondent Nos.1 and 2 are hereby
directed to:
i. Refund the amount of Rs.5,05,91,657/- after adjusting the
excise duty due in respect of one (1) consignment in W.P.
No.27288 of 2014 for which the petitioner has failed to
submit EVC.
ii. Refund the amount of Rs.59, 67,675/- to the petitioner in
W.P.No.27289 of 2014.
iii. The Respondent No.1 and 2 shall undertake refund of the
amounts within a period of four (04) weeks from the date of
receipt of a copy of this order or allow the petitioner to
adjust the aforesaid amount towards payment of Excise Duty
in respect of its future consignments, if any in the coming
Calendar Month viz., November, 2024.
44. Subject to above observations and direction, these Writ
Petitions are disposed of. No costs.
45. As a sequel, miscellaneous petitions pending if any shall
stand closed.
__________________________
JUSTICE T.VINOD KUMAR
Date : 14.10.2024
Vsv
