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1964 Supreme(P&H) 119
PUNJAB & HARYANA HIGH COURT
A.N.Grover and H.R.Khanna JJ.
Karnal Distillery Co. Ltd., Karnal
Versus
State Of Punjab
Civil Writ No. 315 of 1964,
Decided On : AUGUST 20, 1964
The Commissioner had the power to direct the company to cover its uncovered storage tank for molasses under Condition No. 5 of the licence granted to the company, and the Commissioner was entitled to impose a penalty on the company for non-compliance with the direction under sub-section (2) of Section 80 of the Act.
Headnote:
PUNJAB EXCISE ACT, 1914 - SECTION 21, 36(C), 80(2) - PUNJAB DISTILLERY RULES, 1932 - RULE 37 - LICENCE CONDITION NO. 5 - COVERING UNCOVERED STORAGE TANK FOR MOLASSES - PENALTY FOR NON-COMPLIANCE - RECOVERY OF PENALTY AS ARREARS OF LAND REVENUE - LEGALITY.
Fact of the Case:
The petitioner, a distillery company, was directed by the Excise and Taxation Commissioner to cover its uncovered storage tank for molasses. The company failed to comply with the direction and was subsequently imposed a penalty of Rs. 500. The company challenged the order, arguing that the Commissioner had no power to issue the direction and that the penalty was illegal.
Finding of the Court:
The court held that the Commissioner had the power to issue the direction under Condition No. 5 of the licence granted to the company, which required the company to comply with all directions of the Financial Commissioner regarding the character or purity of the liquor to be manufactured, the stock of spirit or material to be maintained, and all other matters in which compliance is prescribed by rules made under the Act. The court also held that the Commissioner was entitled to impose the penalty under sub-section (2) of Section 80 of the Act, which allows the authority having power to cancel or suspend a licence to forego or revoke such cancellation or suspension on payment of a penalty by the holder of the licence.
Issues: 1. Whether the Commissioner had the power to direct the company to cover its uncovered storage tank for molasses. 2. Whether the penalty imposed on the company was legal.
Ratio Decidendi: 1. The court held that the Commissioner had the power to issue the direction under Condition No. 5 of the licence granted to the company, which required the company to comply with all directions of the Financial Commissioner regarding the character or purity of the liquor to be manufactured, the stock of spirit or material to be maintained, and all other matters in which compliance is prescribed by rules made under the Act. 2. The court also held that the Commissioner was entitled to impose the penalty under sub-section (2) of Section 80 of the Act, which allows the authority having power to cancel or suspend a licence to forego or revoke such cancellation or suspension on payment of a penalty by the holder of the licence.
Final Decision: The court dismissed the petition, holding that the Commissioner's order was in accordance with law and that the penalty imposed on the company was legal. However, the court quashed the proceedings which were being taken by the excise authorities for recovery of the amount of penalty as arrears of land revenue, holding that such action was contrary to law and the operative part of the Commissioner's order.
H.R.Khanna, J.
1. The Karnal Distillery Company Limited, Karnal by means of this petition under Articles 226 and 227 of the Constitution of India seeks to challenge the order dated 5th of June, 1963 of the Excise and Taxation Commissioner, Punjab, whereby he imposed a penalty of Rs. 500/- on the management of the petitioner - Company as also the subsequent proceedings for recovery of that penalty.
2. The petitioner-Company owns a distillery at Karnal. It was permitted, in accordance with the provisions of Section 21 of the Punjab Excise Act, 1914 (hereinafter referred to as the Act), to manufacture liquor under the authority of a licence in Form D. 2, dated 5th of November, 1941, granted by the Financial Commissioner. On 11th April, 1962 the petitioner-Company was directed to increase the covered storage capacity of molasses by 15 per cent. This was done on representation of the Indian Sugar Mills Association. The petitioner-Company in its reply dated 20th of April, 1962 expressed its helplessness to comply with the direction for want of space in the distillery premises. Memorandum dated 14th of May, 1962 was then sent to the petitioner-Company that it was obligatory on its part to comply with the direction. On enquiries having been made, it came to the notice of the excise authorities that there was no space within the distillery premises of the petitioner-Company for erecting further storage tanks for molasses. It was then decided that in case it was not possible to erect additional covered storage tank(s) for molasses, the petitioner-Company should at least arrange to cover its uncovered molasses tank by the 31st of October, 1962. The petitioner-Company was apprised of that decision by office memorandum dated 4th of February, 1963. It was also pointed out to the petitioner-Company that in case of its failure to cover its uncovered storage tank, the department would have no option but to proceed against it for violation of the direction. The petitioner-Company sent reply dated 9th of February, 1963 requesting to discuss the matter with the Commissioner. The Company was then told that the Director of the Company could see the Commissioner on 4th of April, 1963. The Company requested for change of date. The Company was then informed that the Director of the Company could see the Commissioner on the 19th April, 1963. The Company again requested for change of date to 21st of April, 1963 but was told that this date did not suit the Excise Commissioner. After this, nothing was heard from the Company. The Commissioner then passed the order that the Company was guilty of violation of Condition No. 5 of the licence which was in the following terms -
"He (the licensee) shall comply with all directions of the Financial Commissioner regarding the character or purity of the liquor to be manufactured the stock of spirit or material to be maintained, and all other matters in which compliance is prescribed by rules made under the Punjab Excise Act (1 of 1914)."
The Commissioner accordingly passed the impugned order, the concluding portion of which reads as under :-
"The management of the Distillery have thus rendered their licence in Form D-2 granted in favour of the Karnal Distillery Company Limited, Karnal, liable to cancellation or suspension under Section 36(c) of the Punjab Excise Act (1 of 1914). However, instead of cancelling the licence, I, in exercise of powers under Section 80(2) of the Act ibid, hereby impose a penalty of Rs. 500 (Rupees five hundred) only on the management of the said distillery. The amount of penalty should be deposited by the management in the Government Treasury, Karnal, within a fortnight of the receipt of this order failing which action for cancellation of the Distillery License will be taken under Section 36(c) ibid."
It may be stated that the Commissioner of excise and Taxation is vested with the powers of the Financial Commissioner.
3 Mr. Sethi on behalf of the petitioner has at the outset, argue
