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2003(7) Supreme 681
SUPREME COURT OF INDIA
(From Patna High Court)
V.N. Khare, CJI., S.B. Sinha, J.
State of Bihar and Ors. -Appellants
versus
Industrial Corporation Pvt. Ltd. and Ors. -Respondents
Civil Appeal Nos. 4618-4630 of 1997
Decided on 4-9-2003
Counsel for the Parties :
For the Appellants : Tapas Ray, Sr. Advocate, Kumar Rajesh Singh, B.B. Singh, Advocates.
For the Respondents : Sunil Kumar Gupta, Y.V. Giri, Sr. Advocates, Mrs. A.K. Verma, Niraj Gupta, Harish J. Jhaveri, Praveen Kumar, Prateek Kumar, Advocates.
For the Respondents in C.A. Nos. 4619-23/97 : M/s J.B.D. & Co., Advocates (NP).
Held : 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. 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. The statutorities authority 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 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. (Paras 16 to 18)
ORDER
Whether the State of Bihar can levy penalty for loss or wastage of molasses, and if so, under law and to what extent and further whether such loss can be directed to be recovered from the respondents, are the questions involved in this batch of appeals which arise out of the judgment and order dated 15.05.1996 passed by a Division Bench of the Patna High Court allowing the writ petitions filed by the respondents herein.
2. Molasses is a bye-product of sugar and is mainly used as a raw material for manufacture of spirit, including alcohol for human consumption.
3. The sale of molasses in the State of Bihar is regulated by an Act, known as the Bihar Molasses (Control) Act, 1947 (the 1947 Act).
4. The respondents herein are the companies registered under the Indian Companies Act and are engaged in the business of manufacture of spirit in the State of Bihar for which they hold licence under the Bihar Excise Act, 1915 (the 1915 Act).
5. The respondents had been granted different licences under the provisions of the Bihar and Orissa Excise Act, the details whereof are as under :
Sl. Name of the distilleries Licence granted in Writ applications No. Excise Form Nos. filed by them
1. M/s. Bihar distillery Ltd. 25, 28-A CWJC No. 6845/89, 1972/93
2. M/s. Arun Chemical Industries 25, 27, 28 1517 and 1518 of 1984
3. M/s. Cawnpore Sugar Works Ltd.25, 27, 28 2334/84, 5648 and 5649 of 1986
4. M/s. S.K.G. Consolidated Ltd. 25, 27, 28, 28-A 2385/88
5. M/s. New Swadeshi Distillery Ltd. 25, 28-A 6433/88, 4696/94 and 8032/95
6. M/s. Ram Narain & Sons 28, 28-A 5484 & 5487/90
6. It is not in dispute that the respondents herein admittedly were engaged in the manufacture of rectified spirit from molasses which are allotted by the Controller of Molasses in terms of the provisions of the 1947 Act and the rules framed thereunder. Some of them are also holders of licences granted in terms of Section 13 of the 1915 Act. While carrying on such manufacture of spirit, allegedly some loss had occurred in the quantity of molasses supplied by the Controller of Molasses. The Comptroller and Auditor General in its report allegedly found out a potential loss of revenue by reason of such loss or wastage of molasses. In the said report the purported potential loss of revenue in relation to each of the licensee had been quantified. Pursuant to or in furtherance of the said audit report notices were issued to the respondents herein levying penal duty. The nature of such penal duty, the extent of shortfall and the period wherefor notices had been issued would appear from the following chart which may be noticed herein by way of example as disclosed in C.A.No. 4619-20 of 1997.
"Civil Appeal No. 4619-20 of 1997
State of Bihar vs. Arun Chemical Industries Pvt. Ltd.
CHART OF SHORTFALL AND PENAL DUTY
1 2 3 4 5 6
PERIOD MOLASSES RECTIFIED RECTIFIED SHORT FALL PENAL DUTY ALLOTTED SPIRIT SPIRIT
(in quintals) desired as actually In recovery of Demanded per Tender produced by
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