M/s. Blu Peacock Ventures vs The Commissioner of Excise and Deputy Commissioner

A.N. Venugopala Gowda, J.—Petitioner is a partnership firm. It had filed WP. No. 30612/2011 questioning an endorsement dated 30.06.2011, issued by the Deputy Commissioner of Excise, Bangalore Urban District (South), Bangalore informing the petitioner that it is not entitled for refund of Rs. 7,59,000/-. The petitioner, apart from questioning the said endorsement, sought issue of a direction to the respondents to refund the said sum collected as additional transfer fee/additional renewal fee under Rule 17-B of the Karnataka Excise License (General Conditions) Rules, 1967. After noticing the rival contentions, the impugned endorsement being found to be bereft of any reason and having been issued without any application of mind to the facts and circumstances of the case and by making reference to an order dated 28.10.2006 passed in WP. No. 8130/2002, being of the view that the matter can be examined only after appreciating the facts and circumstances involved in the case leading to the retirement of one of the partners and the nature of rights and obligations of the remaining partners took upon themselves while continuing the firm, the writ petition was allowed and the impugned endorsement was quashed and the Deputy Commissioner of Excise, Bangalore Urban District (South), Bangalore was directed to consider the representation submitted by the petitioner within a period of two months and pass a reasoned order after affording an opportunity of being heard to the petitioner. The second respondent has passed an order dated 05.09.2012, as at Annexure-A and has declined to direct refund of Rs. 7,59,000/-. Assailing the said order, this writ petition has been filed. Sri. T.K. Vedamurthy, learned HCGP appearing for the respondents submitted that the impugned order can be questioned by filing an appeal u/s 61(2) of the Act before the first respondent and since the petitioner has an alternate, statutory and efficacious remedy, the writ petition may not be entertained. Learned counsel placed reliance on an order dated 19.07.2012 passed in WP. No. 17393/2012 and connected cases (S.A. Suresh & Others vs. The Deputy Commissioner & Others) and submitted that the matter involves disputed questions of fact and hence, it is not open to the petitioner to maintain the writ petition.

Sri. B.N. Shetty, learned Advocate for the petitioner submitted that the payment was made ''under protest'', which also finds a mention in page 3 of the impugned order and as such, the second respondent is unjustified in passing the impugned order. Learned counsel submitted that in view of the record of the case showing the payment of Rs. 7,59,000/- ''under protest'', in view of the circumstances which existed at that point of time, the respondents are liable to refund the sum and the impugned order being arbitrary and illegal warrants interference.

In WP. No. 17393/2012 and connected cases, decided on 19.07.2012, in similar circumstances, this Court has made the following observations:

If this broad legal aspect is kept in mind and the object and purpose behind insertion of Rule 17-B is examined, coupled with the requirements that are to be satisfied while making an application for grant of licence by a firm, it will be clear that the State having exclusive privilege and right of manufacturing and selling intoxicating liquor, can grant licence as a privilege or permission granted by the State to the licencee to sell liquor in the manner prescribed in the licence. If that is so, parting with possession and control of business covered under such a licence would certainly amount to transfer of such privilege. Such an act, if resorted to without the permission of the licensing authority, will be illegal and violative of the terms of licence. Such a situation can be brought about by what may be called as transfer simplicitor or by an act that by implication may tantamount to transfer of such licence.

If a licence is issued in the name of a firm consisting of specified persons as its partners on the basis of the details furnished at the time when the application is filed and if such firm, later on, undergoes change in its constitution/composition or control or management, then it may result in the licence being impliedly transferred in favour of the re-constituted partnership firm. Merely because some of the old partners have continued in the reconstituted firm, may not be a defence to avoid the rigour of Rule 17-B. It all depends on the facts and circumstances of each case. If a partner is newly inducted and he has no real role in the management and control of the existing firm in whose favour the licence is granted, and where such induction does not in any manner bring about major change in the shares held by the partners, then a defence will be open to the firm to say that there is no implied transfer. But, where in a given case induction of new partners has resulted in implied transfer of the management and control in favour of new partners as well, then the rigour of Rule 17-B cannot be avoided.

Rule 17-B is required to be strictly construed It has to be given its full effect. It has to be borne in mind that the licencee has no right to transfer the licence. He cannot achieve this object by camouflaging his actions by resorting to re-constitution of the firm. Whether the action is a camouflage really intended to transfer the licence is a matter that depends on the facts and circumstances of each case and the competent authority has to examine the same.

In the case of Surendra Shetty Vs State of Karnataka, W.P. No. 8130/2002 disposed of on 28.1.0.2006, this Court confirmed the orders passed by the competent authority as affirmed by the Karnataka Appellate Tribunal, wherein it was held that in the name of re-constitution of the firm, the management had been taken over by the petitioner and the original partner had been reduced to insignificant status, tantamounting to change of management. In such circumstances, this Court refused to interfere with the concurrent findings of fact recorded by the authorities holding that there was implied transfer of license as a result of the reconstitution of the firm. Therefore, the issue has to be determined based on the facts and circumstances of each case and not by applying a thumb rule.

In the light of the conclusion that I have reached, it is now not appropriate for this Court to embark upon an enquiry into the nature of the re-constitution and composition and the change of control and management if any of the petitioner firms after re-constitution. The same has to be decided by the competent authority, who, in the instant case, is the Deputy Commissioner of Excise.

However, as the Deputy Commissioner, in the present case, has proceeded on the basis of the Government Order and the clarification issued by the Excise Commissioner based on the Government Order, the authorities have to ignore the said Government Order and examine the matter keeping in mind the principles laid down herein above.

In my opinion, since the impugned order, as at Annexure-A can be questioned in a statutory appeal before the first respondent by invoking the provision u/s 61(2) of the Act, this writ petition is not maintainable. Hence, the petitioner is permitted to avail the appeal remedy. If an appeal were to be filed within four weeks, the time spent in prosecuting of this writ petition from 15.01.2013, till date shall stand excluded. The Appellate Authority should decide the case both on questions of fact and law.

In the said view of the matter, writ petition is disposed of reserving liberty to the petitioner to prefer an appeal as against the impugned order. The first respondent is directed to decide the appeal, if filed, keeping in view the observations made supra and in accordance with law expeditiously and within a period of three months from the date the appeal is filed.

Contentions of both parties are left open for consideration by the Appellate Authority.

No costs.