IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS...

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IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 18TH DAY OF AUGUST, 2017

BEFORE

THE HON'BLE Dr.JUSTICE VINEET KOTHARI

W.P.No.27575/2017, W.P.No.28172/2017 C/W

W.P.No.27988/2017, W.P.No.29609/2017, W.P.No.31513/2017, W.P.No.31515/2017, W.P.No.31517/2017, W.P.No.31518/2017,

W.P.No.25895/2017 AND W.P.No.26805/2017 (EXCISE)

W.P.No.27575/2017:

Between: M/s. High Point Hotels Pvt. Ltd., No.42, 4th Cross, Industrial Layout 5th Block, Koramangala Bengaluru-560 001. By Managing Director Kanchan Lulla W/o Late Harish Lulla Aged about 61 years. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka

2nd Floor, TTMC, ‘A’ Block BMTC Building, Shantinagar Bengaluru-560 027.

R

Date of Judgment: 18-08-2017 W.P.No.27575/2017 & connected matters

M/s. High Point Hotels Pvt. Ltd., and others Vs.

The Excise Commissioner in Karnataka and others

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2. The Deputy Commissioner Bangalore Urban District Bengaluru-560001.

3. The Deputy Commissioner of Excise

Bengaluru Urban District Bengaluru-560027.

… Respondents (By Mr. A.M. Suresh Reddy, AGA)

***** This Writ Petition is filed under Articles 226 & 227 of

the Constitution of India, praying to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned demand as per Annexure-G dated 28-05-2015 issued by the respondent No.2 in EXE AGA AUDIT 41/2012-13 & etc.

W.P.No.28172/2017:

Between: M/s. Omkar Enterprises CL-9 Licensee A Partnership firm near Tin Factory No.33-34, Keerthi Building Old Madras Road, Dooravaninagar Bengaluru By is partner K. Prakash Shetty S/o Prabhakar Shetty. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka

2nd Floor, TTMC, ‘A’ Block BMTC Building, Shantinagar




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Bengaluru-560 001. 2. The Deputy Commissioner

Bangalore Urban District (East) Bengaluru-560001.


Bengaluru Urban District (East) Bengaluru-560001.



the Constitution of India, praying to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned notice as per Annexure-F dated 28-05-2015 in No.EXE AGA AUDIT 41/2012-13 & etc.

W.P.No.27988/2017:

Between: Y.R. Manohar S/o R.K. Kanchan Aged about 64 years CL-9 Licensee M/s. Brigade Garden No.48/12, 2nd Floor Brigade Road Bangalore-560 001. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka

2nd Floor, TTMC, ‘A’ Block




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BMTC Building, Shantinagar Bengaluru-560 027.

2. The Deputy Commissioner

Bangalore Urban District Bengaluru-560 009.


Bangalore Urban District Bengaluru-560009.



the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise year 2017-18 which is now in force as per Annexure-A bearing No.EXE BEM (VA)(PU)(45)/10/CL-9-2016-17 & etc. W.P.No.29609/2017:

Between: Speciality Restaurants Pvt. Ltd, CL-9 Licensee No.136, 1st Cross Road, 5th Block Jyoti Nivas College Road Koramangala. Represented by Santanu Karmakar. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka





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the Constitution of India, praying to issue a writ of mandamus directing the respondent No.2 and 3 to renew the license of the petitioner in Form CL-9 for the Excise Year 2017-18 which is now in force as per Annexure-A & etc.

W.P.No.31513/2017:

Between: Main Land China CL-9 Licensee Aged about 42 years No.14, Church Street Bangalore By its Manager Santanu Karmakar. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka





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W.P.No.31515/2017:

Between: C.K. Dasappa S/o. Late Kariyappa Gowda Aged about 63 years CL-9 Licensee 28/2, 1st Floor, Primus Siddapur, White field Main Road, Bengaluru. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka





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W.P.No.31517/2017:

Between: Specialty Restaurants Pvt. Ltd. Cl-9 Licensee Aged about 42 years No.24, Upper Ground Orion Mall Rajkumar Road Malleshwaram West, Bangalore By its Manager & Authorised Representative Santanu Karmakar. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate) And: 1. The Excise Commissioner in Karnataka





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4. Inspector of Excise

Subramanyanagara Range Bengaluru-560021.




W.P.No.31518/2017:

Between: Specialty Restaurants Pvt. Ltd. Cl-9 Licensee Aged about 42 years No.4032, Golden Lights II Stage, 5th Block, HAL 100ft. Road, Jyoti Nivas College Road Bengaluru By its Manager Santanu Karmakr. … Petitioner (By Mr. K.P. Kumar, Senior Counsel for Mr. G.K. Bhat, Advocate)




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And: 1. The Excise Commissioner in Karnataka

2nd Floor, TTMC, ‘A’ Block BMTC Building, Shantinagar Bengaluru-560 027.








W.P.No.25895/2017:

Between: Sea Route Bar & Restaurant No.725, 1st Floor, M.K. Towers Modi Hospital Road Rajajinagar 1st Stage Bangalore-560 001 Represented by its Proprietor Mr. P. Krishna. Old Address: Searock Bar & Restaurant No.20/3, 27/4




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Kumara Park East Haikrishna Road Shivanand Circle Bangalore-560 001. … Petitioner (By Mr. Ismail Muneeb Musba, Advocate) And: 1. The State of Karnataka

By its Principal Secretary Finance Department Vidhana Soudha Bangalore-560 001.

2. The Deputy Commissioner Excise

Vokkaligara Bhavana Ranichennamma Circle Bengaluru-560 001.


Bangalore City Bengaluru-560001.

4. Inspector of Excise

North Range Bangalore-560 022.


*****

This Writ Petition is filed under Articles 226 & 227 of

the Constitution of India, praying to issue a writ of certiorari

or any other appropriate writ, direction or order quashing

demand notice bearing No.E.Ex.E/AG Audit/41/2012-13

dated 28-05-2015 produced hereto as Annexure-B issued by

the Respondent No.3, D.C. Bangalore City & etc.




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W.P.No.26805/2017:

Between: Sri. T.N. Krishnamurthy S/o Narasimhaiah @ Narase Gowda Aged about 62 years Prop: M/s. Lacasa Bar & Restaurant Katha No.877/1, 878/2, 895/19 & 896/20 1st and 2nd Floor, Blooming Dale Kasavanahalli Carmala Ram Post Bangalore-5600035. … Petitioner (By Mr. K.N. Putte Gowda, Advocate) And: 1. The State of Karnataka

Rep. by its Principal Secretary to Government Department of Finance Vidhana Soudha Dr. B.R. Ambedkar Veedhi Bangalore-560 001.

2. The Commissioner of Excise

Government of Karnataka 2nd Floor, TTMC ‘A’ Block BMTC Building, Shanthinagar Bengaluru-560 027.




Bangalore Urban District Bangalore-560001.





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*****

This Writ Petition is filed under Articles 226 & 227 of the Constitution of India, praying to issue writ of certiorari or any other appropriate writ or order to quash the Order/Notice bearing No.EXE/IML/ KA.MA.E/90/KMR/2017-17 dated 24-05-2017 Annexure-E issued by the third respondent for cancellation of License in respect of Lacasa Bar and Restaurant situated katha No.877/1, 878/2, 895/19 and 896/20, 1st and 2nd Floor, Blooming Dale, Kasavanahalli, Carmala Ram Post, Bangalore-560035 as the same is illegal, arbitrary, unjust and in violation of the principles of natural justice apart from being contrary to Karnataka Excise (sale of Indian and Foreign Liquors) Rules, 1968 & etc.

These Writ Petitions having been reserved for orders

on 25/07/2017, coming on for pronouncement, this day,

Dr Vineet Kothari J., delivered the following:

J U D G M E N T

1. Though the controversy involved in the present

batch of petitions regarding levy of Penalty under Rule

14 (2) of the Karnataka Excise (Sale of Indian and

Foreign Liquor) Rules, 1968 (hereinafter called ‘Excise

Rules of 1968’ for brevity) is covered by an order

passed by this Court in Writ Petition No.10335/2017

(Lakshmi Bar and Restaurant Vs. The State of

Karnataka and others), decided on 27/06/2017, yet,




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the learned counsels for the petitioners urged this Court

to give them a further opportunity to raise certain

additional grounds in the matter and accordingly again

an opportunity was afforded to both the sides to address

their argument before Court.

2. The controversy in brief is regarding the

imposition of Penalty for the short-lifting of the

liquor during the period in question as against the

quantity prescribed under the Rule 14(2) of the Excise

Rules of 1968 from the sole Distributor of Liquor in the

State, viz. Karnataka State Beverages Corporation

Limited (KSBCL). The said Rule 14(2) of the Excise

Rules of 1968 which was inserted on the Statute Book

with effect from 01/04/2003 was omitted with effect

from 01/08/2014 and the demand in question of the

said Penalty which has been held to be in the nature of

a fiscal liability in the aforesaid judgment of this Court

is only for the different periods falling between these two




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dates when the said Rule was existing on the Statute

Book.

3. The relevant part of the aforesaid order passed

by this Court on 27/06/2017 is quoted herein below

again for ready reference:

“7. Having heard the learned counsels, this

court is of the opinion that the present Writ

Petition has no force and is liable to be

dismissed. The reasons are as follows.

8. Before deletion of Sub Rule (2) of Rule 14

of the Karnataka Excise (Sale of Indian &

Foreign liquor) Rules, 1968, although the

second proviso to the said Rule provided for

an opportunity of hearing to the licencee, if he

fails to lift the minimum quantity of liquor so

fixed per month, which quantity was

specified in the said rule itself, before the

penalty at the rate of Rs.100/- for every

bulk litre on the quantity short lifted, is

imposed and if there are two such

monthly defaults, the licence itself was




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liable to be cancelled and the second

proviso to Rule 14 provided that the licencing

authority shall give a reasonable opportunity

of being heard, before levying the penalty or

canceling the licence.

9. As stated above, the said Rule 14(2) itself

stands deleted from the statute book with

effect from 1.8.2014 and the impugned

demand notices and the order was passed by

the Deputy Commissioner are all after the

said deletion of the said Rule 14(2) of the

Rules. So no enforcement of that Proviso

can be claimed as of right now. Even

otherwise, this court is of the opinion that if

the petitioner had any objection to the fact of

the short lifting of the liquor, it was fully open

to her to raise such an objection after the first

demand notice Annexure-D dated 20.5.2016

was served upon her. But, not only after the

Annexure-D demand notice dated

28.5.2016, even after second demand notice

Annexure-E dated 16.8.2016, the

petitioner never raised any demur or

objection before the respondent – authority




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against the demand of penalty for such short

lifting for condoning or waiving such penalty.

10. On the contrary, for seeking the renewal

of the licence for the next year 2016-17, she

gave a clear Undertaking before the

Department that she would pay the said

penalty for short lifting of the liquor for the

previous year 2015-16 vide Annexure-R1

dated 28.6.2016.

11. It is also seen from the perusal of Rule

14 which is quoted herein below in extenso

that it is not actually a penalty requiring any

mensrea or guilty animus on the part of the

licencee. It is rather a fiscal liability or

the price for deficit in full assured

supply to be taken as fixed on the

licencee to compensate the respondent –

Department or the authorized Distillery

company, for the short lifting of the

liquor. The said Rule was introduced in the

statute book to regulate the supply of only

authorized and properly manufactured liquor

from the authorized licencees only to avoid

the smuggling of illegal liquor into the market




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through illegal outlets or source. To check

such a menace, if a liability is fixed under the

Rule for payment of price for the short lifted

quantity of liquor, the same cannot be said to

be a penalty requiring any guilty animus on

the part of the licencee so as to require prior

opportunity of hearing. The fact of short

lifting is to be computed as per the minimum

quantity prescribed under Rule 14 itself and

the rate of penalty of Rs.100/- per bulk litre

is also provided therein. Therefore, nothing

much can be achieved to the contrary by

giving an opportunity of hearing as

demanded in the present case for explaining

the reasons for such short lifting of the liquor,

attracting the imposition of penalty under

Rule 14(2) of the said Rules which now

stands deleted from the statute book itself

w.e.f. 1.8.2014. The said 2nd Proviso for

giving opportunity of hearing can be more

usefully pressed into service if the other

consequence under Rule 14(2) is to follow

namely the cancellation of licence itself and

therefore, the application of the said 2nd




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proviso should be limited for that part of first

proviso to Rule 14(2) of the said Rules.

“Rule 14 – Licensee to abide by the provisions of the Act etc.

[(1)] The licensee or his successors or

assignees shall have no claim

whatsoever to the continuance or

renewal of the licence as the case may

be, after the expiry of the period for

which such licence was granted.

[(2) The licensees holding retail shop

licenses in Form CL-2 and Bar licences

in Form CL-9 shall lift for sale [from a

distributor licensee (CL-11) or a

distributor licensee for vend of foreign

liquor (CL-11A)], the minimum quantity

of liquor (excluding fenny, wine and

beer) fixed per month for the shop

based on the license fee prescribed for

each type of license, overheads, other

expenses incurred, location of the shop,

area of operation, sale of liquor in the

previous years, and similar factors to

ensure that illicit liquor is not obtained




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by the licensees and sold in the shop, to

ensure that no attempt is made to

undersell the liquor and thereby

wholesome liquor obtained only from

authorized sources is sold to the

consumers. In case the licensee fail to

lift the minimum quantity of liquor so

fixed per month, he shall be liable to

pay a penalty at the rate of Rs.100.00

for every bulk litre on the quantity short

lifted:

Sl. No.

Type of Licence Licence fee Minimum quantity of liquor to be lifted in a month

(excluding fenny, wine and beer) (1 case = 9

B.L)

(01) Retail Shop (CL-2)

(a)City Municipal Corporation areas having population more than 20

Rs. 2,23,000

47 cases or 423 bulk litres




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Lakhs

(b) Other city Municipal Corporation areas

(c) City Municipal Council Areas

(d) Town Municipal Council/Town Panchayat Areas

(e) Other Areas

Rs. 1,82,000

Rs. 1,65,000

Rs. 1,25,000

Rs. 1,00,000




23 cases 207 bulk litres.

(02) Refreshment Room (Bar) (CL-9)

(a)City Municipal Corporation

areas having population more than 20 Lakhs:

(b) Other city Municipal Corporation

areas

(c) City Municipal Council Areas

(d) Town Municipal

Council/Town Panchayat

Rs.

3,00,000 Rs.

2,31,000 Rs. 1,82,000

Rs. 1,30,000


47 cases or 423

bulk litres



25 cases 225

bulk litres.




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Provided that in case the licensee

fails to lift the minimum quantity so

fixed consecutively for two months, the

license may liable to be cancelled:

Provided further that the licensing

Authority shall give the licensee, a

reasonable opportunity of being heard

before levying the penalty or canceling

the license.

The minimum quantity of liquor

(excluding fenny, wine and beer) to be

lifted in a month by a CL-2 (Retail

shop)/ CL-9 (Bar) licensee is as

follows:

12. From the facts in the present case, it is

not seen anywhere that the petitioner had

raised any objection or has given any

explanation suitable or otherwise for such

short lifting of the liquor from the respondent –

Department or its authorized

Areas

(e) Other Areas

Rs. 1,00,000




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licencee/manufacturer. Even if the principles

of natural justice were to be complied with as

argued by the learned counsel for the

petitioner, the same cannot yield anything in

the facts of the present case. Being already

aware of the fact situation, the petitioner was

expected at least to raise the objection or give

the reasons for such short lifting of the liquor,

but nothing of this sort is seen in the present

case.

13. On the other hand, the petitioner

seems to have even concealed the

material facts from this court, interalia,

the fact of the subsequent order having been

passed on the Undertaking given by the

petitioner herself on 28.06.2016 and such

order having been passed by the Deputy

Commissioner on 30.06.2016.

14. Thus the petitioner has presented this

Writ Petition with incomplete picture of the

facts.

15. It is well settled that those who have

approached under Article 226 of the




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Constitution of India, exercising writ

jurisdiction has to come to the court with

absolutely clean hands and complete facts

presented to the Court and if the court finds

that there is a concealment of material facts,

the court can refuse to go into the merits of the

case at all and dismiss such Writ Petition only

on the short ground of concealment of material

facts.

16. In either of the case, this court is not

inclined to entertain this petition on the short

ground of alleged breach of principles of

natural justice and on the contrary, this court

is fully satisfied that the case does not merit

any relief in the present case. Therefore, the

Writ Petition is liable to be dismissed.

Accordingly, the petition is dismissed. No costs.”

4. Mr. K.P. Kumar, learned Senior Counsel and

other counsels appearing for the petitioners made the

following submission despite the aforesaid judgment

before this Court for consideration by this Court:




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I. That with the omission and deletion of the said

provisions of Rule 14(2) of the Excise Rules of 1968

with effect from 01/08/2014, since the proceedings for

recovery of the Penalty for short-lifting of the liquor have

been initiated after the said date of 01/08/2014,

therefore, in view of the following Supreme Court

decisions by the Constitution Benches, such

proceedings could not be initiated or continued, even if

they were initiated prior to 01/08/2014;

(i) M/s. Rayala Corporation (P)

Ltd. And Another Vs. The Director of

Enforcement, New Delhi (AIR 1970 SC

494);

(ii) Kolhapur Canesugar Works

Ltd. And Another Vs. Union of India and

others (AIR 2000 SC 811);

II. That the impugned demand notices for the

said Penalty under Rule 14(2) of the Excise Rules of

1968 have been issued without giving any opportunity




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of hearing to the petitioners and since such short-lifting

of the liquor could depend upon or caused by several

factors therefore an opportunity in this regard ought to

have been provided by the Respondent Authority to the

petitioners.

III. That the imposition of Penalty at fixed rate of

Rs.100/- per bulk litre and some of them may be costly

and some may be of cheaper rates and therefore the

“loss of revenue” allegedly caused to the Respondent –

State on account of such short-lifting of the liquor was a

question of fact to be determined by the Respondent –

Assessing Authority for which a notice and opportunity

of hearing was necessary and therefore, the aforesaid

rate of Penalty at the rate of Rs.100/- per bulk litre

cannot be justified in all the cases alike.

IV. Since Rule 14 (2) of the Excise Rules of

1968 for levy of such Penalty is a charging provision

therefore with its omission and deletion with effect from

01/08/2014, neither the alleged offence for short-lifting




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of the liquor remains on the Statute Book nor the

charging provision for levy of the same even as a fiscal

liability remains and therefore the proceedings

determining such liability for the petitioners and the

question of recovery of the same does not arise after

01/08/2014.

5. Mr. K.P. Kumar, learned Senior Counsel

submitted before the Court that in the case of M/s.

Rayala Corporation (P) Ltd. (supra), in a case relating

to prosecution under the provisions of Foreign

Exchange Regulation Act, 1947 (hereinafter referred

to as ‘FERA’ for short), the Hon’ble Supreme Court

considered the question whether the proceedings for

prosecution of the delinquent could be validly continued

under Rule 132-A of Defence of India Rules 1962

after the said Rule 132-A as a whole ceased to be in

existence as a result of the Notification issued by the

Ministry of Home Affairs on 30/03/1965.




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6. Mr. Kumar submitted that the said question

was answered in the negative by the Hon’ble Supreme

Court in the following manner. The relevant extract

from paragraphs 12 and 14 of the said judgment in the

case of M/s. Rayala Corporation (P) Ltd. (supra) are

quoted below for ready reference.

“12. There remains for consideration the

question whether proceedings could be

validly continued on the complaint in respect

of the charge under Rule132-A (4) of the D.I.

Rs. against the two accused. The two

relevant clauses of Rule 132-A are as

follows:

“132A. (2) No person other than an

authorized dealer shall buy or otherwise

acquire or borrow from, or sell or otherwise

transfer or lend to, or exchange with, any

person not being an authorized dealer, any

foreign exchange.

(4) If any person contravenes any of the

provisions of this rule, he shall be punishable




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with imprisonment for a term which may

extend to two years, or with fine, or with

both; and any Court trying such

contravention may direct that the foreign

exchange in respect of which the Court is

satisfied that this rule has been contravened,

shall be forfeited to the Central Government.”

The charge in the complaint against the

two accused was that they had acquired

foreign exchange to the extent of Sw.Krs.

88,913.09 in violation of the prohibition

contained in Rule 132A (2) during the period

when this Rule was in force, so that they

became liable to punishment under Rule

132A (4). Rule 132-A as a whole ceased to

be in existence as a result of the

notification issued by the Ministry of

Home Affairs on 30th March, 1965, by

which the Defence of India (Amendment)

Rules, 1965 were promulgated. Clause 2 of

these Amendment Rules reads as under:-

“In the Defence of India Rules, 1962, Rule

132A (relating to prohibition of dealings in




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foreign exchange) shall be omitted except as

respects things done or omitted to be

done under that rule.”

The argument of Mr. Sen was that, even if

there was a contravention of Rule 132A (2) by

the accused when that Rule was in force, the

act of contravention cannot be held to be

a “thing done or omitted to be done

under that rule,” so that, after that rule

has been omitted, no prosecution in

respect of that contravention can be

instituted. He conceded the possibility that,

if a prosecution had already been started

while Rule 132A was in force, that

prosecution might have been competently

continued. Once the Rule was omitted

altogether, no new proceeding by way of

prosecution could be initiated even

though it might be in respect of an

offence committed earlier during the

period that the rule was in force. We are

inclined to agree with the submission of Mr.

Sen that the language contained in clause 2

of the Defence of India (Amendment) Rules,




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1965 can only afford protection to action

already taken while the rule was in

force, but cannot justify initiation of a

new proceeding which will not be a thing

done or omitted to be done under the rule but

a new act of initiating a proceeding after the

rule had ceased to exist. On this

interpretation, the complaint made for the

offence under Rule 132A (4) of the D.I.

Rs., after 1st April, 1965 when the rule

was omitted, has to be held invalid.”

“14. On the other hand, Mr. Desai on behalf

of the respondent relied on a decision of the

Privy Council in Wicks v. Director of

Public Prosecutions, 1947 AC 362. In that

case, the appellant, whose case came up

before the Privy Council, was convicted for

contravention of Regulation 2A of the Defence

(General) Regulations framed under the

Emergency Powers (Defence) Act, 1939 as

applied to British subjects abroad by section

3 (1 )(b) of the said Act. It was held that, at

the date when the acts, which were the

subject-matter of the charge, were




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committed, the regulation in question

was in force, so that, if the appellant

had been prosecuted immediately

afterwards, the validity of his conviction

could not be open to any challenge at

all. But the Act of 1939 was a temporary

Act, and after various extensions it expired

on February 24, 1946. The trial of the

accused took place only in May 1946, and he

was Convicted and sentenced to four years'

penal servitude on May 28. In these

circumstances, the question raised in the

appeal was: "Is a man entitled to be acquitted

when he is proved to have broken a Defence

Regulation at a time when that regulation

was in operation, because his trial and

conviction take place after the regulation has

expired?" The Privy Council took notice of

sub- section (3) of Section 11 of the

Emergency Powers (Defence) Act, 1939

which laid down that "the expiry of this

Act shall not affect the operation thereof

as respects things previously done or

omitted to be done". It was argued

before the Privy Council that the phrase




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"things previously done" does not cover

offences previously committed. This argument

was rejected by Viscount Simon on behalf of

the Privy Council and it was held that the

appellant in that case could be convicted in

respect of the offence which he had

committed when the regulation was in force.

That case, however, is distinguishable from

the case before us inasmuch as, in that case,

the saving provision laid down that the

operation of that Act itself was not to be

affected by the expiry as respects things

previously done or omitted to be done. The

Act could, therefore, be held to be in operation

in respect of acts already committed, so that

the conviction could be validly made even

after the expiry of the Act in respect of an

offence committed before the expiry. In the

case before us, the operation of Rule

132A of the D.I. Rs. has not been

continued after its omission. The

language used in the notification only

affords protection to things already done

under the rule, so that it cannot permit

further application of that rule by




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instituting a new prosecution in respect

of something already done. The offence

alleged against the accused in the present

case is in respect of acts done by them which

cannot be held to be acts under that rule. The

difference in the language thus makes it clear

that the principle enunciated by the Privy

Council in the case cited above cannot apply

to the notification with which we are

concerned.”

The said judgment relating to ‘offence’ and

‘prosecution’ for alleged breach of Rule 132-A of Defence

of India Rules is quite distinguishable from the facts of

the present case where this question is of compensation

to the State for loss of Revenue caused by short-lifting

of liquor quantity under Rule 14(2) of the Excise Rules

of 1968 is involved.

7. The second case decided by the Constitution

Bench of the Hon’ble Supreme Court in the case of

Kolhapur Canesugar works (supra) and relied upon by




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Mr. Kumar pertain to the provisions for levy of Excise

Duty under the provisions of the Central Excise Act,

1944. Under Section 11-A of the said Act read with

Rule 10 and 10-A of Central Excise Rules (omitted by

Notification dated 06/08/1977) was involved in the

case.

8. The Hon’ble Supreme Court extracted the Show

Cause Notice given to the assessee in para.8 of the

judgment as under:

“8. As the matter stood thus the notice

dated 27th April, 1977 was issued by the

Superintendent, Central Excise, A.G. - I

Kolhapur, which reads as follows :

"NOTICE TO SHOW CAUSE

To

M/s. Kolhapur Canesugar Works Ltd.

Kashba Savada, Kolhapur




35/97

Whereas the Kolhapur Cane Sugar Works

Ltd., Kolhapur Holder of L4 No.2/Sug/93

had presented their claim on 12.7.76 for

rebate of Central Excise duty on sugar

produced in excess during the season

1973-74 by them as new factory

commencing production for the first time

after 1-10-1973 as per provision of S. No.6

of the table of notification No. 189/73 dated

4-10-1973 and that they were granted a

rebate of Rs.61,14,930/- by the

Superintendent, Central Excise, AGI Kolhapur

vide his letter No. Rebate KCW/73-74/76,

dated 23-7-76 and that they had accordingly

taken credit of the said amount in their PLA.

Whereas now on re-examination of the

facts and circumstances connected with the

said rebate claim, it appears that M/s. The

Kolhapur Canesugar Works Ltd.

Kolhapur are merely a subsidiary of the

holding Company viz. M/s. The Kolhapur

Sugar Mills Ltd., Kolhapur, are the owners

of the subsidiary, since all the share issued

by the subsidiary company are purchased by




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them. M/s. Kolhapur Cane Sugar Works Ltd.,

Kolhapur, after formation, have continued

the manufacturing of sugar at and with

the existing and running factory of M/s.

Kolhapur Sugar Mills Ltd., Kolhapur.

Though M/s. Kolhapur Cane Sugar Works

Ltd., Kolhapur obtained a new licence for

the manufacture of sugar, they have not

installed and commissioned working the

new factory. It appears that only the

existing factory has change hands and that

the receiving firm is fully owned by

transferring firm. Therefore, M/s. Kolhapur

Cane Sugar Works Ltd., Kolhapur cannot

be considered as a new factory and that

they commenced manufacturing of sugar

for the first time after 1-10-1973. M/s.

Kolhapur Cane Sugar Works Ltd.,

Kolhapur, do not thus appear to be

entitled to the rebate sanctioned to him

as a new factory.

Whereas it appears that M/s. Kolhapur Cane

Sugar Works Ltd., Kolhapur are not eligible

to rebate for the season 73-74 under any




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other provisions of the notification No. 189/73

dated 4-10-73.

2. Now therefore M/s. Kolhapur Cane Sugar

Works Ltd., Kolhapur are hereby required to

show cause the Assistant Collector, Central

Excise Kolhapur, why the rebate of

Rs.61,14,930/- erroneously sanctioned and

allowed to the credited to their PLA by the

Superintendent under his letter No.

Rebate/KCW/73-74/76 dated 23-7-73,

should not be recovered from them under

Rule 10-A of the Central Excise Rules,

1944.

3. M/s. the Kolhapur Cane Sugar Works Ltd.,

Kolhapur, are further directed to produce at the

time of showing cause all the evidence upon

which they intend to rely in support of their

defence.

4. M/s. Kolhapur Cane Sugar Works Ltd.,

Kolhapur should indicate in the written

explanation whether they wish to be heard in

person before the case is decided. If no

mention is made about this in their written




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explanation, it would be presumed that they do

not desire a personal hearing.

5. If no cause is shown against the action

proposed to be taken within ten days of the

receipt of this notice, or they do not appear

before the Assistant Collector, Central Excise,

Kolhapur, when the case posted for hearing,

the case will be decided on ex-parte.

Sd/ 27-4-77

Superintendent, Central Excise, AGI,

Kolhapur"

9. In the aforesaid factual backdrop, the Hon’ble

Supreme Court held in paragraphs 13 to 15 as under:-

“13. As noted earlier, prior to 6th August,

1977 the relevant provisions in the rule were

Rules 10 and 10-A. In Rule 10 a provision

was made for recovery of duties or

charges short-levied or erroneously

refunded. It was laid down therein that

when duties or charges have been short-




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levied through inadvertence, error, collusion,

or misconstruction on the part of an officer, or

through misstatement as to the quantity,

description or value of such goods on the part

of the owners, or when any such duty or

charge, after having been levied, has been

owing to any such cause, erroneously

refunded, the proper officer may, within

three months from the date on which the

duty or charge was paid or adjusted in

the owner's account-current, if any, or

from the date of making the refund,

serve a notice on the person from whom

such deficiency in duty or charges is or

are recoverable requiring him to show

cause to the Assistant Collector of Central

Excise why he should not pay the amount

specified in the notice. In sub-rule (2) of Rule

10 the Assistant Collector of Central Excise

was vested with the power to pass

appropriate order determining the amount of

duty or charges due from such person and

thereupon such person was to pay the

amount so determined within 10 days from




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the date on which he is required to pay within

the period specified.

14. Rule 10-A contained the provision

regarding residuary powers for recovery

of sums due to Government where the

Rules do not make any specific provision

for the collection of any duty, or of any

deficiency in duty or of any other sum of any

kind payable to the Central Government

under the Act. The procedure laid down in

this rule was similar to Rule 10 i.e. issue of a

show-cause notice for determination of the

amount due, etc.

15. Rules 10 and 10-A were omitted and

a new provision was introduced by Rule

10 with effect from 6th August 1977. In

the said Rule a period of 6 months was

prescribed for initiating action for realisation

of the duty which has not been levied or paid

or has been short levied, erroneously

refunded or any duty assessed has not been

paid in full. No provision regarding

residuary power was made in the Rules.”




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10. Further, the Hon’ble Supreme Court

considered the applicability of Section 6 of the General

Clauses Act and the case of M/s. Rayala Corporation

Limited (supra) in para 22 of the judgment and held

that the earlier view in the decisions of the Gujarat High

Court in Saurastra Chemicals Case and the

Karnataka High Court in the case of Falcon Tyres Ltd.

was not sound in law.

11. The Hon’ble Supreme Court in Kolhapur

Canesugar Works Ltd. (supra) observed in paragraphs

32 to 35 as follows:

“ 32. We have carefully considered the

decisions in Saurashtra Cement and

Chemical Industries, (1993 (42) ECC 126)

(Gujarat) (FB) (supra) and Falcon Tyres case

(1992 (60) ELT 116) (Kant.) (supra). Though

the judgments in these cases were rendered

after the decision of the Constitution Bench in

Rayala Corporation Pvt. Ltd., (AIR 1970 SC

494: 1970 Crl LJ 588) (supra) a different view




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has been taken by the High Courts for the

reasons stated in the judgments. The Full

Bench of the Gujarat High Court in

Saurashtra Cement and Chemical Industries,

(1993 (42) ECC 126) (supra), as it appears

from the discussions in the judgment, tried to

distinguish the decision of the Constitution

Bench in M/s. Rayala Corporation (supra)

for reasons, we are constrained to say

not sound in law. The decision of the

Constitution Bench is directly on the

question of applicability of Section 6 of

the General Clauses Act in a case where

a rule is deleted or omitted by a

notification and the question was

answered in the negative. The

Constitution Bench said that "Section 6

only applies to repeals and not to

omissions, and applies when the repeal is of

a Central Act or Regulation and not of a

Rule". (page 656 of the Supreme Court

Report).”

33. The Full Bench appears to have lost sight

of the position that all the relevant terms i.e.




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'Central Act', 'Enactment' 'Regulation', and

'Rule' are defined in Sub-section 3(7), 3(19),

3(5), 3(50) and 3(51) respectively of the

General Clauses Act. When the term Central

Act or Regulation or Rule is used in that Act

reference has to be made to the definition of

that term in the statute. It is not possible nor

permissible to give a meaning to any of the

terms different from the definition. It is

manifest that each term has a distinct and

separate, meaning attributed to it for the

purpose of the Act. Therefore, when the

question to be considered is whether a

particular provision of the Act applies in a

case then the clear and unambiguous

language of that provision has to be given its

true meaning and import. The Full Bench has

equated a 'rule' with 'statute'. In our

considered view this is impermissible in view

of the specific provisions in the Act. When the

legislature by clear and unambiguous

language has extended the provision of

section 6 to cases of repeal of a 'Central Act' or

'Regulation', it is not possible to apply the

provision to a case of repeal of a 'Rule'. The




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position will not be different even if the rule

has been framed by virtue of the power vested

under an enactment; it remains a 'rule' and

takes its colour from the definition of the term

in the Act (General Clauses Act). At the cost of

repetition we may say that the omissions in

the judgment in M/s. Rayala Corporation

(supra) pointed out in paragraph 17 of the

judgment of the Full Bench have no substance

as they are not relevant for determination of

the question raised for the reasons stated

herein.

34. In paragraph 21 of the judgment the Full

Bench has noted the decision of a Constitution

Bench of this Court in Chief Inspector of Mines

v. ICC. Thapar, AIR (1961) SC 838 and has

relied upon the principles laid down therein.

The Full Bench overlooked the position that

that was a case under section 24 of the

General Clauses Act which makes provision

for continuation of orders, notification,

scheme, rule, form or bye-law, issued under

the repealed Act or Regulation under an Act

after its repeal and re- enactment. In that case




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section 6 did not come up for consideration.

Therefore the ratio of that case is not

applicable to the present case. With respect

we agree with the principles laid down by

the Constitution Bench in M/s. Rayala

Corporation case (supra). In our considered

view the ratio of the said decision squarely

applies to the case on hand.

35. For the reasons set forth above we do

not accept the view taken in Saurashtra

Cement and Chemical Industries Ltd.,

(1993 (42) ECC 126) (Gujarat) (FB) (supra),

in Falcon Tyres Ltd., (1992 (60) ELT 116)

(Kant) (supra) and the other decisions taking

similar view. It is not correct to say that in

considering the question of maintainability of

pending proceedings initiated under a

particular provision of the rule after the said

provision was omitted the Court is not to look

for a provision in the newly added rule for

continuing the pending proceedings. It is

also not correct to say that the test is

whether there is any provision in the

rules to the effect that pending




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proceedings will lapse on omission of the

rule under which the notice was issued.

It is our considered view that in such a case

the Court is to look to the provisions in the

rule which has been introduced after

omission of the previous rule to determine

whether a pending proceeding will continue

or lapse. If there is a provision therein that

pending proceedings shall continue and be

disposed of under the old rule as if the rule

has not been deleted or omitted then such a

proceeding will continue. If the case is

covered by Section 6 of the General

Clauses Act or there is a pari materia

provision in the statute under which the rule

has been framed in that case also the

pending proceeding will not be affected

by omission of the rule. In the absence of

any such provision in the statute or in

the rule the pending proceedings would

lapse on the rule under which the notice

was issued or proceeding was initiated

being deleted/omitted. It is relevant to note

here that in the present case the question of

divesting the Revenue of a vested right




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does not arise since no order directing

refund of the amount had been passed on the

date when Rule 10 was omitted.”

This judgment is not applicable to the present

case before this Court as there the question was of

recovery of refund wrongly given to petitioner, under

Rule 10 and 10-A, after their deletion from Statute

Book with effect from 06/08/1977 in re-enacted Rule

10 (Rule 10-A was not re-enacted), no such provision for

such recovery was made. But in the present case, no

re-enactment of Rule 14(2) of the Excise Rules of 1968

is there after 01/08/2014 and the only question is that

whether the proceedings for recovery for the period

when the Rule 14 (2) was very much on Statute Book

can be initiated and continued or not. The answer has

to be given in affirmative on the basis of applicability of

Section 6 of theGeneral Clauses Act, 1897 and such

levy cannot be allowed to lapse merely because the




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provisions of Rule 14 (2) was deleted with effect from

01/08/2014.

12. Both the aforesaid judgments relied upon by

the learned Senior Counsel, Mr. Kumar in the case of

M/s.Rayala Corporation (P) Ltd. and Kolhapur

Canesugar Works Ltd.(supra) were held to be with

regard to effect of omission of Rule being not treated as

“repeal” saving the Acts done under the repealed

provision by virtue of Section 6 of the General Clauses

Act, 1897, in later judgments, but it seems that

complete upto date research of the relevant case laws

was not made by the learned counsels for the

petitioners, and these were brought to the notice of the

learned counsel for petitioners from Court side.

13. These two Constitutional Bench judgments

were held to be on aforesaid issue in the later

judgments in the cases of Fibre Boards Private

Limited, Bangalore Vs. Commissioner of Income




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Tax, Bangalore [(2015) 10 SCC 333] = 2015 376 ITR

596 and which was affirmed and followed in a still later

decision of the Hon’ble Supreme Court in the case of

Shree Bhagwati Steel Rolling Mills Vs.

Commissioner of Central Excise and another [(2016)

3 SCC P.643]. The following extracts from these

aforesaid two judgments quoted below after noticing

the below quoted provisions of Sections 2 (19), 2(50),

2(51) 6, 6-A and 24 of the General Clauses Act, 1987.

2(19): “enactment” shall include a

Regulation (as hereinafter defined) and any

Regulation of the Bengal, Madras or Bombay

Code, and shall also include any provision

contained in any Act or in any such

Regulation as aforesaid;

2(51): “ rule” shall mean a rule made in

exercise of a power conferred by any

enactment, and shall include a Regulation

made as a rule under any enactment;




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2(50): “Regulation” shall mean a Regulation

made by the President [under article 240 of

the Constitution and shall include a

Regulation made by the President under

article 243 thereof and] a Regulation made by

the Central Government under the

Government of India Act, 1870, or the


Government of India Act, 1935.

6. Effect of repeal. – Where this Act,

or any (Central Act) or Regulation made after

the commencement of this Act, repeals any

enactment hitherto made or hereafter to be

made, then, unless a different intention

appears, the repeal shall not -

(a) revive anything not in force or existing

at the time at which the repeal takes effect; or

(b) affect the previous operation of any

enactment so repealed or anything duly

done or suffered thereunder; or




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(c) affect any right, privilege, obligation or

liability acquired, accrued or incurred

under any enactment so repealed; or

(d) affect any penalty, forfeiture or

punishment incurred in respect of any offence

committed against any enactment so

repealed; or

(e) affect any investigation, legal

proceeding or remedy in respect of any such

right, privilege, obligation, liability, penalty,

forfeiture or punishment as aforesaid,

and any such investigation, legal proceeding

or remedy may be instituted, continued or

enforced, and any such penalty, forfeiture or

punishment may be imposed as if the

repealing Act or Regulation had not been

passed.

[6-A. Repeal of Act making textual

amendment in Act or Regulation:-

Where any [Central Act] or Regulation made

after the commencement of this Act repeals

any enactment by which the text of any




52/97

[Central Act] or Regulation was amended by

the express omission, insertion or substitution

of any matter, then, unless a different

intention appears, the repeal shall not affect

the continuance of any such amendment

made by the enactment so repealed and in

operation at the time of such repeal]

24. Continuation of orders, etc., issued

under enactments repealed and re-

enacted.-

Where any (Central Act) or Regulation,

is, after the commencement of this Act,

repealed and re-enacted with or without

modification, then, unless it is otherwise

expressly provided any (appointment

notification,) order, scheme, rule, form or bye-

law, (made or ) issued under the repealed Act

or Regulation, shall, so far as it is not

inconsistent with the provisions re-enacted,

continue in force and be deemed to have been

(made or) issued under the provisions so re-

enacted, unless and until it is superseded by

any (appointment, notification,) order,




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scheme, rule, form or bye-law, (made or)

issued under the provisions so re-enacted

(and when any (Central Act) or Regulation,

which, by a notification under Section 5 or 5A

of the Scheduled Districts Act, 1874, (14 of

1874) or any like law, has been extended to

any local area, has, by a subsequent

notification, been withdrawn form the re-

extended to such area or any part thereof, the

provisions of such Act or Regulations shall be

deemed to have been repealed and re-

enacted in such area or part within the

meaning of this Section).

14. The definitions of enactment, Rule,

Regulation and Repeal from Mysore General Clauses

Act, 1899 are also quoted below:

2(19): “enactment” shall include a

Regulation (as hereinafter defined) and any

Regulation of the Bengal, Madras or Bombay

Code, and shall also include any provision

contained in any Act or in any such

Regulation as aforesaid;




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2(51): “ rule” shall mean a rule made in

exercise of a power conferred by any

enactment, and shall include a Regulation

made as a rule under any enactment;

2(50): “Regulation” shall mean a Regulation

made by the President [under Article 240 of

the Constitution and shall include a

Regulation made by the President under

Article 243 thereof and] a Regulation made by

the Central Government under the



Government of India Act, 1935.

6. Effect of repeal. – Where this Act,

or any (Central Act) or Regulation made after

the commencement of this Act, repeals any

enactment hitherto made or hereafter to be

made, then, unless a different intention

appears, the repeal shall not -

(f) revive anything not in force or existing

at the time at which the repeal takes effect; or




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(g) affect the previous operation of any

enactment so repealed or anything duly done

or suffered thereunder; or

(h) affect any right, privilege, obligation or

liability acquired, accrued or incurred under

any enactment so repealed; or

(i) affect any penalty, forfeiture or

punishment incurred in respect of any offence

committed against any enactment so

repealed; or

(j) affect any investigation, legal

proceeding or remedy in respect of any such

right, privilege, obligation, liability, penalty,

forfeiture or punishment as aforesaid,

and any such investigation, legal proceeding

or remedy may be instituted, continued or

enforced, and any such penalty, forfeiture or

punishment may be imposed as if the

repealing Act or Regulation had not been

passed.




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[6-A. Repeal of Act making textual

amendment in Act or Regulation:-

Where any [Central Act] or Regulation

made after the commencement of this Act

repeals any enactment by which the text of

any [Central Act] or Regulation was amended

by the express omission, insertion or

substitution of any matter, then, unless a

different intention appears, the repeal shall

not affect the continuance of any such

amendment made by the enactment so

repealed and in operation at the time of such

repeal]

15. The Hon’ble Supreme Court in the case of

Fibre Boards Private Limited (supra) not only held

that the view in the cases of M/s. Rayala Corporation

(P) Ltd. and Kolhapur Canesugar Works Ltd. (supra)

was not only an obiter dicta with regard to express

omissions of enactment or Rule, but even an attempt

made for referring the matter to the larger bench in the

case of General Finance Company Vs. CIT (2002) 7




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SCC 1 was negatived by the Hon’ble Supreme Court in

the case of Fibre Boards Private Limited (supra). The

following extract from paragraphs 25 to 33 of the said

judgment is quoted below for ready reference.

25. In Rayala Corpn. (P) Ltd., what

fell for decision was whether proceedings

could be validly continued on a complaint in

respect of a charge made under Rule 132-

A of the Defence of India Rules, which

ceased to be in existence before the accused

were convicted n respect of the charge made

under the said Rule. The said Rule 132-A

was omitted by a Notification dated 30-3-

1966. What was decided in that case is set

out by para 17 of the said judgment, which is

as follows: (SCC p.424)

“17. Reference was next made to a

decision of the Madhya Pradesh High

Court in State of M.P. v. Hiralal

Sutwala but, there again, the accused

was sought to be prosecuted for an

offence punishable under an Act on




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the repeal of which Section 6 of the

General Clauses Act had been made

applicable. In the case before us,

Section 6 of the General Clauses Act

cannot obviously apply on the

omission of Rule 132-A of the DIRs for

the two obvious reasons that Section 6

only applies to repeals and not to

omissions, and applies when the

repeal is of a Central Act or Regulation

and not of a Rule. If Section 6 of the

General Clauses Act had been applied,

no doubt this complaint against the

two accused for the offence punishable

under Rule 132-A of the DIRs could

have been instituted even after the

repeal of that Rule.”

26. It will be clear fro a reading of

this paragraph that the Madhya Pradesh

High Court judgment was distinguished by

the Constitution Bench on two grounds. One

being that Section 6 of the General

Clauses Act does not apply to a rule but

only applies to a Central Act or




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Regulation, and secondly, that Section 6

itself would apply only to a “repeal” not

to “an omission.” This statement of law

was followed by another Constitution Bench

in Kolhapur Canesugar Works Ltd. case.

After setting out para 17 of the earlier

judgment, the second Constitution Bench

judgment states as follows: (SCC p.550, para

33)

“33. In para 21 of the judgment

the Full Bench has noted the decision

of a Constitution Bench of this Court

in Chief Inspector of Mines v.

Karam Chand Thapar and has

relied upon the principles laid down

therein. The Full Bench

overlooked the position that that

was a case under Section 24 of

the General Clauses Act which

makes provision for continuation

of orders, notification, scheme,

rule, form or bye-law, issued

under the repealed Act or

regulation under an Act after its




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repeal and re-enactment. In that

case Section 6 did not come up for

consideration. Therefore the ratio of

that case is not applicable to the

present case. With respect we

agree with the principle laid

down by the Constitution Bench

in Rayala Corpn. case. In our

considered view the ratio of the said

decision squarely applies to the case

on hand.”

27. Kolhapur Canesugar Works

Ltd. judgment also concerned itself with the

applicability of Section 6 of the General

Clauses Act to the deletion of Rules 10 and

10-A of the Central Excise Rules on 6-8-1977.

28. An attempt was made in General

Finance Co. v. CIT to refer these two

judgments to a larger Bench on the point that

an omission would not amount to a repeal for

the purpose of Section 6 of the General

Clauses Act. Though the Court found

substance in the argument favouring the

reference to a larger Bench, ultimately it




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decided that the prosecution in cases of non-

compliance with the provision therein

contained was only transitional and cases

covered by it were few and far between, and

hence found on facts that it was not an

appropriate case for reference to a larger

Bench.

29. We may also point out that in G.P.

Singh’s Principles of Statutory

Interpretation, 12th Edn., the learned

author has criticized the aforesaid

judgments in the following terms:

“Section 6 of the General Clauses

Act applies to all types of repeals.

The section applies whether the repeal be

express or implied, entire or partial or

whether it be repeal simpliciter or repeal

accompanied by fresh legislation. The

Section also applies when a temporary

statute is repealed before its expiry, but

it has no application when such a

statute is not repealed but comes to

an end by expiry. The section on its

own terms is limited to a repeal brought




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about by a Central Act or Regulation. A

rule made under an Act is not a

Central Act or Regulation and if a

rule be repealed by another rule,

Section 6 of the General Clauses Act

will not be attracted. It has been so

held in two Constitution Bench decisions.

The passing observation in these cases

that “Section 6 only applies to repeals

and not to omissions’ needs

reconsideration for omission of a

provision results in abrogation or

obliteration of that provision in the

same way as it happens in repeal.

The stress in these cases was on the

question that a ‘rule’ not being a

Central Act or Regulation, as defined

in the General Clauses Act, omission

or repeal of a ‘rule’ by another ‘rule’

does not attract Section 6 of the Act

and proceedings initiated under the

omitted rule cannot continue unless the

new rule contains a saving clause to that

effect.” (at pp.697-98).




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30. In view of what has been stated

hereinabove, perhaps the appropriate course

in the present case would have been to refer

the aforesaid judgment to a larger Bench.

But we do not find the need to do so in view

of what is stated by us hereinbelow.

31. First and foremost, it will be

noticed that two reasons were given in

Rayala Corpn. (P) Ltd. for distinguishing the

Madhya Pradesh High Court judgment.

Ordinarily, both reasons would form the ratio

decidendi for the said decision and both

reasons would be binding upon us. But we

find that once it is held that Section 6 of

the General Clauses Act would itself not

apply to a rule which is subordinate

legislation as it applies only to a Central

Act or Regulation, it would be wholly

unnecessary to state that on a construction of

the word “repeal” in Section 6 of the General

Clauses Act, “omission” made by the

legislature would not be included. Assume,

on the other hand, that the Constitution

Bench had given two reasons for the non-




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applicability of Section 6 of the General

Clauses Act. In such a situation, obviously

both reasons would be ratio decidendi and

would be binding upon a subsequent Bench.

However, once it is found that Section 6 itself

would not apply, it would be wholly

superfluous to further state that on an

interpretation of the word “repeal”, an

“omission” would not be included. We are,

therefore, of the view that the second so-

called ratio of the Constitution Bench in

Rayala Corpn. (P) Ltd. cannot be said to

be a ratio decidendi at all and is really

in the nature of obiter dicta.

32. Secondly, we find no reference to

Section 6-A of the General Clauses Act in

either of these Constitution Bench judgments.

Section 6-A reads as follows:

“ 6-A. Repeal of Act making

textual amendment in Act or

Regulation:-

Where any [Central Act] or Regulation

made after the commencement of this

Act repeals any enactment by which




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the text of any [Central Act] or

Regulation was amended by the

express omission, insertion or

substitution of any matter, then, unless

a different intention appears, the repeal

shall not affect the continuance of any

such amendment made by the

enactment so repealed and in operation

at the time of such repeal]

33. A reading of this Section would

show that a repeal by an amending Act can

be by way of an express omission. This

being the case, obviously the word “repeal” in

both Section 6 and Section 24 would,

therefore, include repeals by express

omission. The absence of any reference to

Section 6-A, therefore, again undoes the

binding effect of these two judgments on

an application of the per incuriam

principle.”

16. In a later case in the case of Shree Bhagwati

Steel Rolling Mills (supra), it was again argued before

the Hon’ble Supreme Court that the judgment in the




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case of Fibre Boards Private Limited (supra) also

requires reconsideration. But negativing the said

contention and following its earlier view in the case of

Fibre Boards Private Limited (supra), the Hon’ble

Supreme Court in the case of Shree Bhagwati Steel

Rolling Mills(supra) again reiterated the position

relating to “repeal” and “omission” and “enactment”

including “Regulations” held as under:

“12. From this it is clear that when

Section 6 of the General Clauses Act speaks

of the repeal of any enactment, it refers not

merely to the enactment as a whole but also

to any provision contained in any Act. Thus,

it is clear that if a part of a statute is

deleted. Section 6 would nonetheless

apply. Secondly it is clear, as has been

stated by referring to a passage in

Halsbury’s Laws of England in Fibre

Board judgment, that the expression

“omission” is nothing but a particular

form of words evincing an intention to

abrogate an enactment or portion




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thereof. This is made further clear by the

Legal Thesaurus (Deluxe Edition) by William

C. Burton, 1979 Edition. The expression

“Delete” is defined by the Thesaurus as

follows:

“Delete: - Blot out, cancel, censor, cross

off, cross out, cut, cut out, dele, discard, do

away with, drop, edit out, efface, elide,

eliminate, eradicate, erase, excise, expel,

expunge, extirpate, get rid of, leave out,

modify by excisions, obliterate, omit, remove,

rub out, rule out, scratch out, strike off, take

out, weed, wipe out.”

Likewise the expression “omit” is also defined

by this Thesaurus as follows:-

“Omit: - Abstain from inserting, bupass,

cast aside, count out, cut out, delete, discard,

dodge, drop, exclude, fail to do, fail to include,

fail to insert, fail to mention, leave out, leave

undone, let go, let pass, let slip, miss, neglect,

omittere, pass over, praetermittere, skp,

slight, transpire.”




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And the expression “repeal” is defined as

follows:

“ Repeal: - Abolish, abrogare,

abrogate, annul, avoid, cancel, countermand,

declare null and void, delete, eliminate,

formally withdraw, invalidate, make void,

negate, nullify, obliterate, officially withdraw,

override, overrule, quash, recall, render

invalid, rescind, rescindere, retract, reverse,

revoke, set aside, vacate, void, withdraw.”

“13. On a conjoint reading of the three

expressions “delete”, “omit”, and “repeal”, it

becomes clear that “delete” and “omit” are

used interchangeably, so that when the

expression “repeal” refers to “delete” it

would necessarily take within its ken an

omission as well. This being the case, we

do not find any substance in the

argument that a “repeal” amounts to an

obliteration from the very beginning,

whereas an “omission” is only in futuro.

If the expression “delete” would amount to a

“repeal”, which the appellant’s counsel does

not deny, it is clear that a conjoint reading of




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Halsbury’s Laws of England and the Legal

Thesaurus cited hereinabove both lead to the

same result, namely, that an “omission” being

tantamount to a “deletion”’’ is a form of

repeal.”

21. It is settled law that Parliament is

presumed to know the law when it enacts a

particular piece of legislation. The Prevention

of Corruption Act was passed in the year

1988, that is long after 1969 when the

Constitution Bench decision in Rayala Corpn.

had been delivered. It is, therefore, presumed

that Parliament enacted Section 31 knowing

that the decision in Rayala Corpn. had stated

that an omission would not amount to a repeal

and it is for this reason that Section 31 was

enacted. This again does not take us further

as this statement of the law in Rayala

Corpn. is no longer the law declared by

the Supreme Court after the decision in

Fibre Board case.

23. Fibre Board case is a recent

judgment which, as has correctly been argued

by Shri Radhakrishnan, learned Senior




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Counsel on behalf of the Revenue, clarifies the

law in holding that an omission would amount

to a repeal. The converse view of the law has

led to an omitted provision being treated as if

it never existed, as Section 6 of the General

Clauses Act would not then apply to allow the

previous operation of the provision so omitted

or anything duly done or suffered thereunder.

Nor may a legal proceeding in respect of any

right or liability be instituted, continued or

enforced in respect of rights, and liabilities

acquired or incurred under the enactment so

omitted. In the vast majority of cases, this

would cause great public mischief, and

the decision of Fibre Board case is

therefore clearly delivered by this Court

for the public good, being, at the very

least a reasonably possible view. Also, no

aspect of the question at hand has remained

unnoticed. For this reason also we decline to

accept Shri Aggarwal’s persuasive plea to

reconsider the judgment in Fibre Board case.

This being the case, it is clear that on point one

the present appeal would have to be




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dismissed as being concluded by the decision

in Fibre Board case.

17. The learned counsel for the Respondents-

Excise Department, Mr. N. Suresh has also brought to

the notice of the Court that the Constitutional validity of

the aforesaid Rule-14(2) of the 1968 Excise Rules was

examined by the Division Bench of this Court in the

case of State of Karnataka & Ors. Vs. Hotel

Bangalore International Ltd., (ILR 2005 KAR 1397)

and the same was upheld with the following

observations:-

“7. Keeping in view the law governing

the field and the dictum of the Apex Court, the

controversy in the present case is to be

examined. The respondents are CL-2 and Cl-9

licencees. These categories of licencees come

in contact with public at large and offer liquor

for sale. It is found that over the years, these

licencees transacted a meagre business

which is insufficient even to meet the

prescribed licence fee. This clearly indicates




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that there was purchase and sale of liquor

clandestinely leading to evasion of huge

amounts of excise duty. With an object to

plug these loopholes and in the interest

of State revenue and public interest, the

excise Department collected details from

various Districts and after thorough

examination, notified the draft Rules on

21.6.2002, proposing to amend the Rules by

insertion of Sub-rule (2) Rule 14, 14A and 14B

of the Rules.

12. It is now well settled that Article 14

does not forbid reasonable clarification for the

purpose of legislation. In the present case,

among the various categories of licencees, it is

CL-2 and CL-9 licencees who come into

contact with public at large and offer liquor

for sale. According to the information collected

by the State, the business transacted by

these categories of licencees is so meagre and

insufficient even to meet the prescribed

licence fee. This clearly indicates that there

was purchase and sale of liquor clandestinely

leading to evasion of huge amounts of excise

duty. In order to plug these loopholes and




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in the interest of revenue, the State

under the impugned notification referred

only CL-2 and CL-9 licencees and

excluded the other categories of

licencees. This classification by the State

can neither be said to be arbitrary nor

discriminatory. To achieve the object which

is expedient, the State in its wisdom included

the CL-2 and CL-9 licencees in the impugned

notification. It is clear that the differentiation

has a rational relation to the object sought to

be achieved by the impugned notification.

Therefore, the contention of respondents that

the impugned notification is violative of Article

14 of the Constitution is liable to be rejected”.

18. It may be noted here that the question of vires

of the said Rule 14(2) of the Excise Rules of 1968 is not

even under challenge again before this Court in this

case, but the only question is, whether it’s “omission” or

“repeal” with effect from 01.08.2014 divests the Excise

Authorities to invoke the said Rule and demand the

penalty/damages for short lifting of the liquor from the




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State Board Corporation for the period when the said

Rule-14(2) on the Statute Book, between 01/04/2003

to 01/08/2014.

19. The learned Senior counsel for the petitioner

Mr.K.P.Kumar upon the aforesaid later judgments in the

case of Fibre Boards Pvt.Ltd., (supra) and Sri.

Bhagavathi Steel Rolling Mills (supra) brought to his

notice, submitted that even though the omission of the

Rule may be treated as ‘repeal’ though in earlier cases

in the cases of M/s.Rayala Corporation Pvt. Ltd., and

Kolhapur Canesugar Works Ltd., it was held to be not

amounting to repeal, still, the repeal of a Rule is not

saved by applying Section 6 of the General Clauses Act,

1897, and the decisions of the Constitution Bench of

Supreme Court in Rayala Corporation and Kolhapur

Canesugar Works would still hold the field and govern

the present case.




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20. The said contention is fallacious and not

sustainable for the following reasons:-

Firstly, the repeal or omission in the case of

Rayala Corporation and Kolhapur Canesugar Works

Ltd. were also repeal of Rules only. Rule 132-A of the

Defence of India Rules, 1962, relating to prosecution

was omitted and Rule 10 and 10-A in the Central Excise

Rules relating to recovery of excess refund or rebate was

omitted in the case of Kolhapur Canesugar case. The

decision of the Constitution Bench with regard to such

‘omission’ not amounting to ‘repeal’ has been held to be

per incuriam or only obiter dicta in the later decisions in

the case of Fibre Boards (2015) and Bhagawathi

Steels (2016) and it has been categorically held that

such omission of enactment would also amount to

‘repeal’ and Section 6 of the General Clauses Act would

apply and save the action taken under the repealed

provision, as discussed above.




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Secondly, levying of penalty/damages under Rule

14(2) of the State Excise Rules, 1968 in question, as

contended by Mr.K.P.Kumar himself is that the said

Rule is a charging provision and except the said Rule,

there was no other provision for imposing the said

penalty/damages for short lifting of liquor quantity. If it

is a charging provision, as it appears to be, there is no

reason to treat the ‘Rule’ 14(2) as anything different

from a ‘Section’ or ‘enactment’ or a ‘provision’ covered

by the scope of Section 6 of the General Clauses Act,

1897. It may also be noticed that in 1897, when India

was not independent and no ‘Rules’ under delegated

powers to the State Government were framed at that

time therefore absence of word ‘Rule’ in Section 6 of the

General Clauses Act, 1897 in the context of situation

then obtaining should not allow the levy of

Penalty/damages under Rule like Rule 14 (2) of present

Excise Rules to lapse by holding that Section 6 of the

General Clauses Act does not apply to Rules. It is only




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after the State Re-organization Act, 1956 that States in

India started enacting such Rules under their delegated

powers under the relevant Acts.

Merely because it is a ‘Rule’ enacted by the State

Legislature under the delegated powers under Section

71 of the Karnataka State Excise Act, 1965, it does not

lose the legislative sanction and sustainability as a

charging provision and its omission or repeal cannot

deprive the Respondents-Excise Department to invoke

and apply this provision by virtue of Section 6 of the

General Clauses Act for demanding the

penalty/damages for the short lifting of the liquor, for

the period during which the said Rule 14 (2) existed on

the Statute Book. The same will be clearly saved by

virtue of Section 6 of the General Clauses Act, 1897

enacted much prior to independence of India even

though the word ‘Rule’ is not separately mentioned in

Section 6 of the Act. The Mysore General Clauses Act,

1899 includes ‘Rules’ within the definition of




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‘Enactment’. Therefore, despite some legislative gap for

applying a saving clause to a charging provision, it

cannot be allowed to fail, more so when the liability to

pay pertains to a period when the said charging

provision was very much on the Statute Book.

21. Therefore, this contention of the learned

Senior counsel for the petitioner is held to be devoid of

merit and the action of the Respondents-Excise

Department for demand of such penalty/damages for

compensating the loss of revenue caused to the State by

such short lifting of liquor quantity cannot be held to be

without jurisdiction or illegal.

22. It would be appropriate here to consider the

judgment of the Hon’ble Supreme Court in the case of

M/s. Guljag Industries Vs. Commercial Tax Officer and others

[(2007 9 VST 1 (SC)] wherein the Hon’ble Supreme Court

dealing with the case of levy of Penalty from the

Consignors or Consignee or even Transporters for not




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carrying on Declaration Form prescribed under the

provisions of Section 78(2) of the Rajasthan Sales Tax

Act for regulating the checking of the Transit movement

of goods for sale. Paragraph 22 of the said judgment

reads as hereunder:

22. There is dichotomy between

contravention of section 78(2) of the said

Act which invites strict civil liability on

the assessee and the evasion of tax.

When a statement of import/export is not filed

before the A.O. it results in evasion of tax,

however, when the goods in movement are

carried without the declaration form

No.18A/18C then strict liability comes in, in

the form of Section 78(5) of the said Act.

Breach of section 78(2) imposes strict

liability under section 78(5) because as

stated above goods in movement cannot be

carried without form No.18A/18C. We are not

concerned with non-filing of statements before

the A.O. We are concerned with the goods in

movement being carried without supporting

declaration forms. The object behind




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enactment of Section 78(5) which gives

no discretion to the competent authority

in the matter of quantum of penalty

fixed at 30 per cent of the estimated

value is to provide to the State a remedy

for the loss of revenue. The object behind

enactment of section 78(5) is to emphasise

loss of revenue and to provide a remedy

for such loss. It is not the object of the

said section to punish the offender for

having committed an economic offence and to

deter him from committing such offences. The

penalty imposed under the said Section

78(5) is a civil liability. Willful consignment

is not an essential ingredient for attracting

the civil liability as in the case of prosecution.

Section 78(2) is a mandatory provision. If

the declaration form 18A/18C does not

support the goods in movement because it is

left blank then in that event section 78(5)

provides for imposition of monetary penalty

for non-compliance. Default or failure to

comply with section 78(2) is the

failure/default of statutory civil obligation

and proceedings under section 78(5) are




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neither criminal nor quasi-criminal in

nature. The penalty is for statutory

offence. Therefore, there is no question of

proving of intention or of mens rea as the

same is excluded from the category of

essential element for imposing penalty.

Penalty under section 78(5) is attracted as

soon as there is contravention of statutory

obligations. Intention of parties

committing such violation is wholly

irrelevant. Moreover, in the present case, we

find that goods in movement carried with form

No.18A/18C. The modus operandi adopted

by the assessees itself indicates mens rea.

This is not the case where goods in movement

are carried without the declaration forms. In

the present matter, as stated above, goods in

movement were carried with the declaration

forms. These forms were duly signed,

however, material particulars were not filled

in. The explanation given by the assessees in

most of the cases is that they are not

responsible for the misdeeds of the

consignors. The other explanation given by

the assessees is regarding the language




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problem. There is no merit in these defences.

They are excuses. The declaration forms were

unfilled so that they could be used again and

again. The forms were collected by the

consignee from the said Department. The

consignee undertakes to see that the value of

the goods is supplied by the consignor. It is

not open to the consignee to keep the column

in respect of the description of goods as

blank. Even the column dealing with nature of

transaction is left blank. The consignee is the

buyer of the goods. He knows the

descriptions of the goods which he is

supposed to buy. There is no reason for

leaving that column blank. Therefore, there

are no special circumstances in any case for

waiver of penalty for contravention of section

78(2). The assessees were fully aware that

the goods in movement had to be supported

by form ST 18A/18C. Therefore, they made

the goods travel with the forms. However, the

said forms are left blank in all material

respects. Therefore, A.O. was right in drawing

inference of mens rea against the assessees.

It has been repeatedly argued before us that




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apart from the declaration forms the

assessees possessed documentary evidence

like invoice, books of accounts, etc., to support

the movement of goods and, therefore, it was

open to the assessees to show to the

competent authority that there was no

intention to evade the tax. We find no merit in

this argument. Firstly, we are concerned with

contravention of section 78(2) which requires

the goods in movement to travel with the

declaration in form 18A/18C duly filled in. It

is section 78(2)(a) which has been

contravened in the present case by the

assessees by carrying the goods with blank

forms though signed by the consignee. In fact,

the assessees resorted to the above modus

operandi to hoodwink the competent officer at

the check-post. As stated above, if the form is

left incomplete and if the description of the

goods is not given then it is impossible for the

assessing officer to assess the taxable goods.

Moreover, in the absence of value/price it is

not possible for the A.O. to arrive at the

taxable turnover as defined under section

2(42) of the said Act. Therefore, we have




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emphasized the words "material particulars"

in the present case. It is not open to the

assessees to contend that in certain cases of

inter-State transactions they were not liable

in any event for being taxed under the RST

Act, 1994 and, therefore, penalty for

contravention of section 78(2) cannot be

imposed. As stated hereinabove, declaration

has to be given in form 18A/18C even in

respect of goods in movement under inter-

State sales. It is for contravention of section

78(2) that penalty is attracted under section

78(5). Whether the goods are put in movement

under local sales, imports, exports or inter-

State transactions, they are goods in

movement, therefore, they have to be

supported by the requisite declaration. It is

not open to the assessee to contravene

and say that the goods were exempt.

Without disclosing the nature of transaction it

cannot be said that the transaction was

exempt. In the present case, we are only

concerned with the goods in movement not

being supported by the requisite declaration.




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23. This judgment really covers the controversy

involved in the present case under Rule 14(2) of the

Excise Rules of 1968.

24. The premise of Rule 14 (2) for recovering ‘Loss

of Revenue” to State caused by short lifting of liquor

quantity, is in corollary to ‘Penalty’ recovered under

Rule 21 (5) of MMDR (Mine & Mineral Development

Regulations), wherein a recent decision rendered by

Hon’ble Supreme Court only on 2nd August 2017,

relying upon its previous decision in the case of

Karnataka Rare Earth case (2004) 2 SCC 283 held

that such compensation to State should be fully

recovered even if illegal mining of ore, was done on any

land, even if not covered by mining lease or Mining Plan.

This judgment is on all fours to the present case. The

relevant extract from the said judgment in Common

Cause Vs. Govt. of India and others (Writ Petition




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(Civil) No.114/2014, decided on 2nd August 2017, is

quoted below for ready reference:

“148. On behalf of the State of Odisha, it

was submitted by Shri Rakesh Dwivedi

learned senior counsel by relying upon

Karnataka Rare Earth v. Senior Geologist,

Department of Mines & Geology that what is

sought to be achieved by Section 21(5) of

the MMDR Act is to recover the price of

the mineral that has been illegally or

unlawfully or unauthorisedly raised with

an intention to compensate the State for

the loss of the mineral owned by it, the

loss having been caused by a person who is

not authorized by law to raise that mineral.

There is no element of penalty involved

in this and the recovery of the mineral or

its price is not a penal action but is

merely compensatory. This is what this

Court had to say in Karnataka Rare Earth:

“12. Is the sub-section (5)

of Section 21 a penal enactment? Can

the demand of mineral or its price




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thereunder be called a penal action

or levy of penalty?

13. A penal statute or penal law

is a law that defines an offence and

prescribes its corresponding fine,

penalty or punishment. (Black’s Law

Dictionary, 7th Edn., p.1421). Penalty is

a liability composed (sic imposed) as a

punishment on the party committing

the breach. The very use of the term

“penal” is suggestive of punishment

and may also include any

extraordinary liability to which the law

subjects a wrong-doer in favour of the

person wronged, not limited to the

damages suffered. (See Aiyar P.

Ramanatha: The Law Lexicon, 2nd

Edn., p.1431).

14. In support of the submission

that the demand for the price of mineral

raised and exported is in the nature of

penalty, the learned counsel for the

appellants has relied on the marginal

note of Section 21. According to




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Justice Singh, G.P.: Principles of

Statutory Interpretation (8th Edn.,

2001, at p.147) though the opinion is

not uniform but the weight of authority

is in favour of the view that the

marginal note appended to a section

cannot be used for construing the

section. There is no justification for

restricting the section by the marginal

note nor does the marginal note control

the meaning of the body of the section

if the language employed therein is

clear and spells out its own meaning.

In Director of Public Prosecutions v.

Schildkamp, Lord Reid opined that a

sidenote is a poor guide to the scope of

a section for it can do no more than

indicate the main subject with which

the section deals and Lord Upjohn

opined that a sidenote being a brief

precis of the section forms a most

unsure guide to the construction of the

enacting section and very rarely it

might throw some light on the




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intentions of Parliament just as a

punctuation mark.

15. We are clearly of the opinion

that the marginal note “penalties”

cannot be pressed into service for

giving such colour to the meaning of

sub-Section (5) as it cannot have in

law. The recovery of price of the

mineral is intended to compensate

the State for the loss of the mineral

owned by it and caused by a person

who has been held to be not entitled in

law to raise the same. There is no

element of penalty involved and the

recovery of price is not a penal

action. It is just compensatory.”

149. We are in agreement with the view

expressed by learned Attorney General and

Shri Dwivedi as also the view expressed in

Karnataka Rare Earth. The decision in

Khemka & Co. is not at all apposite. There is

no ambiguity in Section 21(5) of the MMDR

Act or in its application. We are also of




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opinion that though Section 21(1) of MMDR

Act might be in the realm of criminal

liability, Section 21(5) of the MMDR Act is

certainly not within that realm.

150. In our opinion, Section 21(5) of the

MMDR Act is applicable when any person

raises, without any lawful authority, any

mineral from any land. In that event, the

State Government is entitled to recover

from such person the mineral so raised

or where the mineral has already been

disposed of, the price thereof as

compensation. The words ‘any land’ are

not confined to the mining lease area. As far

as the mining lease area is concerned,

extraction of a mineral over and above what

is permissible under the mining plan or under

the EC undoubtedly attracts the

provisions of Section 21(5) of the MMDR

Act being extraction without lawful

authority. It would also attract Section

21(1) of the MMDR Act. In any event,

Section 21(5) of the Act is certainly attracted

and is not limited to a violation committed by




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a person only outside the mining lease area –

it includes a violation committed even within

the mining lease area. This is also because

the MMDR Act is intended, among other

things, to penalize illegal or unlawful mining

on any land including mining lease land and

also preserve and protect the environment.

Action under the EPA or the MCR could be

the primary action required to be taken

with reference to the MCR and Rule 2(ii a)

thereof read with the Explanation but that

cannot preclude compensation to the State

under Section 21(5) of the MMDR Act. The

MCR cannot be read to govern the MMDR

Act.

151. What is the significance of this

discussion? It was submitted that the CEC

has taken the following view:

“ ….. it may be appropriate

that 30% of the notional value of the iron and

manganese produced by each of the lessees

without/in excess of the environmental

clearances may be directed to be recovered

from the concerned lessees and with the




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explicit understanding the concerned lessees

as well as the officers will continue to be

liable for action under the provisions of the

respective Acts.”

152. Learned counsel for the petitioners

and the learned Amicus were of opinion that

the provisions of Section 21(5) of MMDR Act

requires that the entire price of the illegally

mined ore should be recovered from each

defaulting lessee. Similarly, in its affidavit,

the Union of India differs with the

recommendation of the CEC. According to the

affidavit of the Union of India this would be

contrary to the statutory scheme and in fact

100% recovery should be made under the

provisions of Section 21(5) of the MMDR. We

may note that only to this extent, the learned

Attorney General differed with the view

expressed by the Union of India and

submitted that the recommendation of the

CEC to recover only 30% of the value of the

illegally mined ore should be accepted.




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153. In our opinion, there can be no

compromise on the quantum of

compensation that should be recovered

from any defaulting lessee – it should be

100%. If there has been illegal mining, the

defaulting lessee must bear the consequences

of the illegality and not be benefited by

pocketing 70% of the illegally mined ore. It

simply does not stand to reason why the

State should be compelled to forego what

is its due from the exploitation of a

natural resource and on the contrary be a

party in filing the coffers of defaulting lessees

in an ill gotten manner.

25. Thus while full compensation to State is

realizable for illegal mining in areas other than the one

covered by Mining Lease to full extent, besides criminal

liability under Rule 21(1) of MMDR, as held by Hon’ble

Apex Court, there is no reason, why a similar

compensation for not lifting the prescribed quantity of

liquor for the given period should not be recovered,




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besides a consequence of cancellation of licence itself.

Thus, the latest judgment of Hon’ble Apex Court

completely clinches the issue in favour of State in the

present case as well.

26. From the above, it is clear that the reliance

placed by the learned Senior Counsel for the petitioners

on the earlier Constitution Bench decisions in the case

of M/s. Rayala Corporation (P) Ltd. (supra) and

Kolhapur Casesugar Works Limited (supra) is of little

assistance to the case of the petitioners before this

Court and the action taken against these petitioners

with regard to Rule 14 (2) of the Excise Rules for a

period prior to its omission on 01/08/2014 is justified

and the said demand of Penalty/fiscal liability cannot be

struck down on the basis of the aforesaid contention

raised on behalf of the petitioners.




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27. This Court is further of the view that the

said fiscal liability in the name of Penalty under Rule 14

(2) of the Excise Rules of 1968 is actually the price or

the liquidated damages to be paid by the Excise

Licencees or vendors of liquor for the breach of contract

on their part for short-lifting of the prescribed quantity

of liquor from the State Beverage Corporation. That is

why there is no need to go into the question of mens rea

or opportunity of hearing or raising an objection in that

regard was considered appropriate in the aforesaid case

in Lakshmi Bar and Restaurant case (supra), decided

by this Court on 27/06/2017 and the requirement of

giving such opportunity wherein Rule 14(2) was

restricted in the case where the licence itself was sought

to be cancelled for the said reason of short-lifting of the

liquor.

28. This Court also does not find any merit in the

contention No.III that measure of Penalty under Rule 14

(2) cannot be assailed on different price range for




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different types of liquor. It is for the Legislature to

adopt such measure and no illegality or arbitrariness is

seen in such a measure adopted in Rule 14(2) in the

present case.

29. This Court has also noticed that in none of

the cases, the petitioners have even raised any such

objections or reasons for such short lifting of liquor.

Had it been so raised, the authority concerned of the

Excise Department could have been expected to pass

appropriate orders in this regard. Having not done that,

the petitioners cannot be permitted to raise the said

plea of alleged breach of principles of natural justice to

get the demand notices quashed on the said ground.

30. Having said as above, this Court is of the view

that while upholding the levy, about its mathematical

computation and assessment, the petitioners can be

given even now an opportunity of hearing. Therefore,

the Respondent authorities are directed to pass




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speaking adjudication orders, in cases where Objections

are now filed about the quantum of penalty and

damages under Rule 14 (2) of the Excise Rules of 1968,

within a period of one month from today. However, no

objection as to the very levy shall be entertained by

them. The petitioners are permitted to file such

Objections within one month from today and thereafter

a period of two months is allowed to the respective

authorities to pass such orders thereon. No extension

of time would be permitted to any of the parties in this

regard.

31. Petitions are accordingly disposed of with

aforesaid observations. No order as to costs.

Sd/- JUDGE

BMV*/Srl

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IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS...

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