Demand notices for shortfall in production void due to lack of jurisdiction and failure to provide a hearing as mandated by law.

ORDER :

K.S. HEMALEKHA, J.

The petitioner has approached this Court seeking for the following reliefs :

“Issue a writ of certiorari or a writ in the nature of certiorari, by calling for the records pertaining to impugned demand notices No:EXE/UBM/AUDIT/01/2023-24 DATED 15.07.2024 (at Annexure A1), No.EXE/UBM/AUDIT /01/2023-24 dated 25.09.2024 (at Annexure A2), NO:SDK/02/AUDIT/UB/2023-24 dated 04.11.2024 (at Annexure A3) issued by respondent no.4 and respondent no.3, and after going into the legality and validity thereof, to quash the impugned demand notices, and forbear the respondents, their agents, servants and officers etc., from acting pursuant thereto, and pass such further orders as this Hon’ble Court may deem fit and proper in the facts and circumstances of the present case.

a) Issue a Writ of Mandamus or a writ in the nature of Mandamus directing Respondent No.3 and Respondent No.4 to withdraw the Impugned Demand Notices raised vide Letters No:EXE/UBM/AUDIT/01/2023-24 dated 15.07.2024 (at Annexure A1), No: EXE/UBM/AUDIT/01/2023-24 dated 25.09.2024 (at Annexure A2), No:SDK/02/AUDIT/UB/2023-24 dated 04.11.2024 (at Annexure A3)

b) Pass any other order(s), such other order(s) and/or further order(s) as this Hon’ble Court may deem fit and just in the facts of the case and in the interest of justice.”

Brief facts:

2. Petitioner, United Breweries Limited, operates a licensed brewery at Baikampady, Mangalore, where all stages of manufacture, storage and dispatch of beer are carried out under the continuous physical supervision of the State Excise officials and the State Brewery Book and Stock Book are verified and countersigned by the Excise Department. For the excise period July 2017 to June 2018, the petitioner consumed 32,53,420 kgs of malt against the minimum statutory yield prescribed under Schedule A to Rule 3 of the Yield Rules, 6,500 litres of beer per 1,000 kgs of malt required production of 2,11,47,230 litres and the petitioner actually produced 2,66,34,500 litres which is well above the prescribed statutory minimum.

3. An audit was conducted by the Principal Accountant General and recorded that there is a short production of by improperly including adjuncts (rice, sugar, maize etc.,) in the yield formula. Based on the audit observation, respondent No. 3 and respondent No. 4 issued demand notices dated 15.07.2024, 25.09.2024 and 04.11.2024 demanding ` 29,26,074,057/- without any enquiry.

4. Sri S.S.Naganand, the learned Senior Counsel appearing for the petitioner, contends that the impugned demand notices issued by respondent No. 3 and respondent No. 4 are wholly without jurisdiction as Rule 7 of the Karnataka Excise (Regulation of Yield Production and Wastage of Spirit, Beer, Wine or Liquors) Rules, 1998 (‘Rules, 1998 for short), vests the adjudicatory power exclusively in the Excise Commissioner and there is no provision under Rule 7 to permit delegation and therefore the subordinate officers cannot assume or exercise such quasi-judicial authority. It is further contended that the excise period is July 2017 to June 2018, the statutory formula under Schedule A required a minimum yield of 6,500 litres of beer per 1,000 kilograms of malt and the petitioner used 32,53,420 kilograms of malt and mandatorily required to manufacture 2,11,47,230 litres. However the petitioner in fact produced 2,26,34,500 litres far exceeding the statutory minimum. Hence no shortfall existed either in fact or in law. It is submitted that the respondents erroneously attempted to compute minimu